ANGLO IRISH Bank has taken the first step to sharing €1.6 billion of its losses with subordinated bondholders by reaching an agreement to repay 20 per cent of the debt owing on one of three bonds.
The bank said investors on its 2016 subordinated bond agreed to change terms on the debt to allow the exchange to proceed under which they are being offered €100 million of the €500 million owed.
The agreement to the changing of the bond’s terms was seen by some as out a signal of how bondholders intended to vote.
Conor Houlihan, a solicitor at Dillon Eustace, which advises investors in the subordinated bonds of Irish banks, said yesterday’s result may surprise those expecting bondholders to block the offer, but that later meetings would be “of far greater interest”.
Sources representing bondholders objecting to the offer said the agreement was simply a precondition to allow a vote on the offer to proceed.
If all subordinated bondholders agree to the offer, the bank will make a profit of €1.6 billion which will go towards the bank’s bailout.
Anglo’s offer has been described by credit ratings as tantamount to a default as the bank is offering just one cent for every €1,000 of debt they hold if they refuse to agree to the exchange.
The offer is open to holders of Anglo’s 2014 and 2016 subordinated bonds until December 20th.
A second meeting will be held on December 22nd at which a final vote will be taken by bondholders.
Holders of the bank’s 2017 subordinated bond had until 4pm yesterday to say how they would vote ahead of an announcement by the bank on Monday and a meeting of the bondholders on Tuesday.
Anglo is trying to swap €325 million on the 2014 bond, €500 million on the 2016 bond and €750 million on the 2017 bonds, forcing a 80 per cent haircut on the face value of the debts. The Government is seeking a significant contribution from subordinated bondholders for the €29 billion cost of Anglo to the State.
Some Anglo subordinated bondholders holding more than €690 million of debt are threatening legal action against the bank over its refusal to negotiate on the offer.
