Anglo junior bonds may net €270m

Junior bondholders of the doomed Anglo Irish Bank could be in line for a multi- million euro payout as the sale of assets of the Irish Bank Resolution Corporation (IBRC) continues to surpass expectations.

The liquidation of IBRC, formed from the embers of Anglo and Irish Nationwide, has yielded €16.5bn to date, resulting in a surplus of €1.85bn to distribute among its unsecured creditors. Among those creditors are unsecured junior bondholders who stand to benefit to the tune of €270m from the available funds.

Last December, Taoiseach Enda Kenny ruled out the prospect of junior bondholders being paid, saying he did not see any circumstances under which it could happen. The prospect of paying the bondholders is one the Government would rather avoid given the platform on which it was elected in 2011 and with another general election looming.

Central Bank governor Patrick Honohan also told the Oireachtas banking inquiry last month that guaranteeing all junior bonds was “clearly a mistake”.

As the last in line for payment it was envisaged that the junior bondholders would not benefit from the liquidation process — a situation which is now thrown into doubt given the surplus reported by the special liquidators yesterday.

A department spokesperson said yesterday that the amount owed to unsecured creditors will only become apparent when all claims are received and validated.

The figure however is set to fall in the €1.5bn to €1.6bn bracket. Both the State and a host of other unsecured creditors will have precedence over bondholders’ claims.

Once the State’s €1.1bn is repaid and taken from the overall surplus, about €750m will remain to cover the €400m to €500m of unsecured creditors’ claims — opening the door for junior bondholders to benefit.

The stumbling block to bondholders expecting an IBRC windfall is the ongoing legal proceedings, including those against the family of former billionaire Seán Quinn in which it is embroiled.

Costs arising from these legal proceedings will need to be provided for before bondholders get their hands on the potential payoff. Consequently, it will likely be years before any gains are realised. Nama, which was owed €12.9bn of secured debt and which was at the top of pecking order for repayment, has been reimbursed in full.

Finance Minister Michael Noonan hailed the success of the liquidation process yesterday and said the taxpayer would not be on the hook for further support.

“The success of the loan sales processes devised by the special liquidators negated the need to transfer any assets to Nama as part of this process and removes any residual risk of further calls on the exchequer,” Mr Noonan said.

The minister also confirmed that the special liquidators — Kieran Wallace and Eamonn Richardson of KPMG — are likely to be in a position to make an interim distribution to unsecured creditors before the end of the year. Creditors in the UK and Ireland, including various local authorities and credit unions, have until March 31 to submit their claims.

Rather than referring to the €34bn of taxpayer funds pumped into the failed lenders, the surplus instead means that more has been recouped from the sale of IBRC’s assets than the total debts owed. Get all the latest business news here Read more of today’s news here

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