Bondholders’ vote boost for Anglo

ANGLO Irish Bank’s plan to raise fresh capital by buying back subordinated debt at a discount — and thus share the pain of its bailout between the Irish taxpayer and international bondholders — has moved a step closer to reality, with the aforementioned bondholders showing initial support for the scheme.

A vote in London, yesterday, saw bondholders support the ‘notes purchase resolution’ debt exchange, which would see them receive a return of just 20% on their debt.

Due to the terms of the initial debt issuance the vote on the deal is having to take place on a two-tier basis. A second meeting of bondholders — relating to debt maturing in 2016 — is due on December 22.

While that vote will formally decide on the deal either going ahead or being rejected, yesterday’s ballot was viewed as equally important as it was seen as the vote most at risk of being blocked by those investment funds who are most opposed to the deal.

The new debt exchange deal would see Anglo generate fresh capital by exchanging almost €1.6bn of lower Tier 2 debt at 20c on the euro for new Government-guaranteed bonds due in 2011.

Those bondholders voting against a successful deal would get just 1c for every €1,000 worth of Anglo bonds they currently hold.

Yesterday’s result — according to Conor Houlihan, partner with law firm, Dillon Eustace — was “a necessary pre-condition to moving forward with the proposed exchange offer in respect of the 2016 notes”.

Anglo has, of course, already cost the Irish taxpayer nearly €30bn in bailout costs.

Meanwhile, international news agency Bloomberg yesterday reported that two subordinated bondholders of Irish Nationwide Building Society (INBS) have told a London court hearing that a lawsuit seeking the liquidation of the nationalised lender should be allowed to proceed. The bondholders, Satinland Finance Sarl and Trimast Holding Sarl, said the bank bailout is forcing them to assume part of the burden that should be shouldered by the Irish government.

Elsewhere, yesterday, the yields/interest rates on 10-year Irish government bonds rose, slightly, to 8.09% as the markets cautiously awaited progress on the IMF/EU aid negotiations with the Government.