INBS and Anglo bondholders to take action to avoid losses

BONDHOLDERS in Irish Nationwide (INBS) and Anglo Irish Bank are set to take action to avoid incurring losses on their investments.

Reports were suggesting yesterday that international bondholders in INBS are to hold a conference call today to discuss their situation and talk about what actions they may take over any potential losses they suffer. It is understood that bondholders in Anglo are planning a similar move.

Although Finance Minister Brian Lenihan recently reiterated that the Government won’t impose losses on senior bondholders in either institution; scope for some sort of deal seemed to present itself last week.

During a Dáil committee appearance, the Financial Regulator Matthew Elderfield reiterated Mr Lenihan’s stance, but added that it didn’t rule out the possibility “of some negotiations or a liquidity management exercise agreed by consent”.

Speaking on his current US lecture tour, yesterday, the Governor of the Central Bank Patrick Honohan remarked that any action (such as buying back debt at a discounted price) against senior bondholders, particularly in relation to Anglo, would be a “highly risky” move on the Government’s part.

The bondholder groups are likely to include both holders of senior/long- term bonds and shorter- term subordinated bonds (which, in both cases, are trading well below their initial value); but it is thought neither group is large enough to legally block any Government decision here.

However, the Government has already said it would include subordinated debt holders in a share of restructuring costs.

Meanwhile, it emerged yesterday that Lloyds Banking Group has reached agreement with the management of its former Irish banking arm — Bank of Scotland (Ireland) — over the terms of the new company which is to handle the winding down of the company’s Irish operations and manage its remaining loan book here. The new company will beheaded up by former BoSI head, Joe Higgins.