State may be sued by major hedge funds over IBRC
SEVERAL major international hedge funds are gearing up to sue the Irish State over allegations that the Government "unlawfully wiped out" in the region of €1.8bn of IBRC bonds when it liquidated the bank last month.
Citing several sources familiar with the matter, the latest edition of the International Financing Review (IFR) says a decision by the IBRC's special liquidator not to appeal a judgment granted to European hedge fund, Assenagon Asset Investment, which sued the bank after it tried to burn its €170m junior bondholding "could now open the floodgates for litigation".
One London-based lawyer who spoke to the IFR said: "I have been approached by creditors looking at what legal avenues are available for them in the IBRC case.
"We will likely see bondholders looking to challenge the exit consent and the legality of the liquidation." Commenting further on the potential illegality of the Government's decision to liquidate the IBRC, a source at a hedge fund with an interest in the now defunct bank said: "There was no external trigger to cause the liquidation, there was no liquidity problem – the bank had a 5 per cent Core Tier 1 ratio. Basically, the Irish government has said it will just stiff the people doing business with the IBRC."
Already it is understood that Assenagon Asset Investment, which is now known as Xaia Investment, is taking legal advice to reignite its claim against the State, in which it would try to prove that the liquidation of the IBRC was illegal under ECB rules or simply a "contrived" insolvency designed to wipe out its creditors.
Contacted by the Sunday Independent yesterday, a spokesman for the Department of Finance declined to comment on the report in the International Financing Review, choosing to refer instead to the material published in relation to the IBRC liquidation on the department's website on February 6.
On the issue of litigation being taken against the IBRC, the department said then: "Claimants who have issued proceedings against IBRC will now have to pursue and prove their debt to the Special Liquidators. Such claimants will rank as unsecured creditors in the liquidation.
"As would be the case with any liquidation, claimants who issue proceedings against IBRC in respect of claims that arose prior to the winding-up will be unsecured creditors".