Thursday October 07 2010
Subordinated bondholders in Anglo Irish and Irish Nationwide are working on a plan to set up an action group to oppose government plans to apply a 'haircut' to their investments, the Irish Independent has learned.
A London law firm has been consulted already on setting up the group, and several financial analysts have also been asked to give their view. How many holders of Anglo and Irish Nationwide securities join the group will be watched closely on both sides of the Irish Sea.
Already, a firm linked to Russian billionaire Roman Abramovich has objected to the plan to ensure "burden sharing'' among subordinated bondholders. Legislation to allow this is being drafted by Attorney General Paul Gallagher.
Mr Gallagher is working the legislation that would put the taxpayer ahead of subordinated bondholders in the queue to be repaid as Anglo Irish Bank and Irish Nationwide are wound down.
"The obligation (to subordinated bondholders) would remain on the book, but the taxpayer would be given priority over the sub debt," Finance Minister Brian Lenihan told bond investors during a conference call on Friday.
Under the planned law, subordinated bonds will not be cancelled. The law would insert a claim by taxpayers for the cost of their support ahead of the subordinated bondholders of the two banks.
The scale of the Government's support makes it highly unlikely taxpayers will ever be paid back in full, so the chances of subordinated bondholders being repaid would then be remote. The minister reiterated that senior bonds would not be affected and that the legislation would not apply to other Irish banks.
- Emmet Oliver and Donal O'Donovan
