Saturday 17 March 2018

Noonan now refusing to burn Anglo bondholders

Minister's repayment U-turn allegedly driven by the European Central Bank


Finance Minister Michael Noonan has ruled out burning senior bondholders in Anglo Irish Bank, despite earlier indications that he would seek to do so, the Sunday Independent can reveal.

It is believed, according to well-placed sources, that the decision not to burn the Anglo bondholders is being driven once again by the European Central Bank.

Last week's Central Bank review of Anglo Irish Bank and Irish Nationwide has found no need for the State to inject additional money into the two institutions. The Central Bank's independent review had come in line with the previous assessments, which were carried out last September.

Following comments by Financial Regulator Matthew Elderfield in April that losses would be imposed if more taxpayer's money was needed for Anglo and Nationwide, there was an impression given to the markets that if no more money was needed then the bondholders would be paid back in full.

That situation has been confirmed by the Department of Finance, and as a result senior bondholders at Anglo, totalling €3.4bn, will not be burnt and will be paid back in full.

Last September, it was estimated that Anglo would need an additional €6.4bn to cope with losses from bad loans, while Irish Nationwide would need another €2.7bn. This brought the total state capital provided since 2009 to €29.3bn and €5.4bn respectively.

The latest review, carried out by BlackRock Solutions, which undertook stress tests of the other Irish banks earlier this year, had looked at Irish Nationwide's mortgage, commercial property and other lending books.

This was because no independent review of INBS had been carried out for more than a year. BlackRock found that the previous estimates were 'robust'.

As the Anglo estimates were more recent, BlackRock carried out a review of the approach and the results and concluded the previous results were 'reasonable'.

Bank of Ireland is offering to buy back debt from subordinated bondholders for 10 per cent or 20 per cent of its original value. The offer is part of the bank's efforts to raise €5.2bn to meet the Central Bank's capital target.

BoI revealed plans to impose losses on the bondholders last Tuesday and released more details on Friday on the offer relating to €2.6bn of debt. Analysts estimate that the bank will raise about €2bn from the liability management exercise.

On Tuesday, the High Court will hear the case of AIB subordinated bondholders Aurelius Capital Management, who are suing Mr Noonan over his plans to impose losses.

This follows the withdrawal of a similar case taken by Abadi Securities, who had also objected to Mr Noonan's plans. Mr Noonan said the withdrawal of the case was a "vindication of his policy".

Sunday Independent

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