Burned bondholders win Anglo case-will Irish banks have to pay compensation?

[PaddyJoe]

Bet there's a few cases of indigestion among the DOF and Central Bank mandarins today:

STATE-backed Irish banks are facing a potentially massive compensation bill after the High Court in London ruled that a 'burden sharing' deal that forced losses on some lenders was unlawful.
The UK court ruling has deemed the "coercive" measures taken to persuade junior bondholders to accept losses on €1.6bn owed by Anglo Irish Bank in 2010 breached UK law.

The judge admitted the decision could have major repercussions right across the eurozone and gave Irish Bank Resolution Corp (IRBC), which owns what remains of Anglo, leave to appeal the decision.
The bank was last night considering its legal options, but is almost certain to appeal.
If not, it faces a huge compensation bill from other investors affected by the same deal.
Investors hit with losses in similar actions by Bank of Ireland and AIB are also likely to seek to re-open their settlements, if yesterday's judgment goes unchallenged. Bank of Ireland and AIB each saved in the region of €2bn by forcing similar losses on bondholders, and Irish Life & Permanent (LI&P) and EBS Building Society also saved smaller but considerable amounts with similar actions.
http://www.independent.ie/business/i...l-3182205.html

[C. Flower]

Bet there's a few cases of indigestion among the DOF and Central Bank mandarins today:
The judge admitted the decision could have major repercussions right across the eurozone and gave Irish Bank Resolution Corp (IRBC), which owns what remains of Anglo, leave to appeal the decision.
The bank was last night considering its legal options, but is almost certain to appeal.
If not, it faces a huge compensation bill from other investors affected by the same deal.
Investors hit with losses in similar actions by Bank of Ireland and AIB are also likely to seek to re-open their settlements, if yesterday's judgment goes unchallenged. Bank of Ireland and AIB each saved in the region of €2bn by forcing similar losses on bondholders, and Irish Life & Permanent (LI&P) and EBS Building Society also saved smaller but considerable amounts with similar actions.
http://www.independent.ie/business/i...l-3182205.html

Bondholder burning was never going to be an easy fix in the way suggested by the likes of Ganley and also SF, SP and SWP.

The British will ferociously defend their corner to avoid taking a hit, as will the US, who fear a call on CDS if there are defaults.

With Iceland, Britain sequestered Icelandic funds, using anti-terror laws. They have tough debt law, and the EU is increasingly tying borrowing arrangements into that law.

Better be prepared for a fight.

[PaddyJoe]

The Indo returns to this today:

IRISH banks could face massive compensation claims from out-of-pocket lenders within weeks, lawyers warned last night.

It follows a UK court ruling that found a 'burden sharing' deal that forced losses on some lenders to banks was unlawful.

The ruling which was made last week, throws a huge question mark over the saving of €5bn from the overall cost of bank rescues through deals that "burned" so-called junior bondholders in Anglo Irish Bank, AIB, Bank of Ireland, Irish Life & Permanent (IL&P) and EBS Building Society.

"The ball is now in the banks' and Government's court, but if they fail to settle with bondholders I believe they could be liable to bondholders seeking summary judgments in the English courts," said Steven Friel, partner at law firm Brown Rudnick, who represents subordinated bondholders in a number of Irish banks.

http://www.independent.ie/business/i...g-3188726.html

[Captain Con O'Sullivan]

This brings me to the great unspoken question about Irish banks that have been effectively been nationalised by default and of course more generally about other banks across Europe which have swooned dramatically into the arms of the taxpayers.

My question is; What arrangements have been made towards recovering from these banks over time the amount of public money made available to them during the crisis?

Mention of this is mysteriously missing from these affairs. 'Injecting liquidity' is used as a term alongside 'recapitalising' but who is totting up the bill and at what protective rate of interest do the taxpayers get paid back?

My own suspicion is that of course in some sunny upland of future stability these banks will be again offered to private shareholders. The implication being that such a privatisation will repay the exchequer for money spent keeping them breathing.

But who keeps a count of this? In my lifetime I know of a handful of banks who ended up on the public lifeline and I have yet to see a scenario where public money spent on them has been fully recovered.

If IBRC is to be floated at some mythical future date I want to know who is doing the calculations and whether the cost of liquidity is being clawed back.

Public services, schools, hospitals and so on have been cut back, cancelled, and taxes increased because of these institutions. How will the government in that future day of glory ensure the taxpayer gets that money back with an appropriate adjustment for inflation?

Or will IBEC get the benefit of such a future privatisation? Would IBRC even be big enough again if properly regulated to ever repay the public money spent on it?

[C. Flower]

This brings me to the great unspoken question about Irish banks that have been effectively been nationalised by default and of course more generally about other banks across Europe which have swooned dramatically into the arms of the taxpayers.

My question is; What arrangements have been made towards recovering from these banks over time the amount of public money made available to them during the crisis?

Mention of this is mysteriously missing from these affairs. 'Injecting liquidity' is used as a term alongside 'recapitalising' but who is totting up the bill and at what protective rate of interest do the taxpayers get paid back?

My own suspicion is that of course in some sunny upland of future stability these banks will be again offered to private shareholders. The implication being that such a privatisation will repay the exchequer for money spent keeping them breathing.

But who keeps a count of this? In my lifetime I know of a handful of banks who ended up on the public lifeline and I have yet to see a scenario where public money spent on them has been fully recovered.

If IBRC is to be floated at some mythical future date I want to know who is doing the calculations and whether the cost of liquidity is being clawed back.

Public services, schools, hospitals and so on have been cut back, cancelled, and taxes increased because of these institutions. How will the government in that future day of glory ensure the taxpayer gets that money back with an appropriate adjustment for inflation?

Or will IBEC get the benefit of such a future privatisation? Would IBRC even be big enough again if properly regulated to ever repay the public money spent on it?

The EU/IMF Memorandum sets out a process of recapitalisation of banks, and downsizing of the irish banking sector, after which the well-stuffed and profitable banks are meant to be handed over to various cronies privatised.

[PaddyJoe]

This could turn out badly. At least we don't have any warships that the bondholders could impound

THE State could face compensation claims from out-of-pocket bondholders following reports that former subordinated bondholders in Bank of Ireland and Allied Irish Banks are seeking compensation for being forced to take massive losses on bonds they held.

The moves by the bondholders could force banks to beg the State for fresh cash or prolong the losses posted by AIB, which effectively belongs to the State, and Bank of Ireland, which is part-owned by taxpayers.

The moves follow a UK court ruling in July that found a 'burden sharing' deal by the former Anglo Irish Bank that forced losses of around €1.6bn on some lenders to banks to be unlawful.

The ruling cast a huge question mark over the saving of €5bn from the overall cost of bank rescues through deals that "burned" so-called junior bondholders in Anglo Irish Bank, AIB, Bank of Ireland, Irish Life & Permanent (IL&P) and EBS Building Society.

http://www.independent.ie/business/i...s-3304430.html

[PaddyJoe]

Fir Tree is still chasing payment on that 200 million worth of Anglo subordinated bonds:

Two Cayman Island hedge funds have appealed a US court ruling that State-owned Irish Bank Resolution Corporation can avail of sovereign immunity to avoid being sued in the US by bond holders who lost money in its restructuring.

The funds – Fir Tree Capital Opportunity Master Fund and Fir Tree Value Master Fund – bought $200 million (€148 million) of subordinated Anglo Irish Bank bonds in November 2010 and unsuccessfully sued the bank in the US courts in 2011 after the Government forced bondholders to take write-downs on the value of their subordinated bonds as part of the bank’s restructuring.

Paul Smith, representing Fir Tree, argued in the US Court of Appeal in New York yesterday that IBRC could not avail of the 1976 Foreign Sovereign Immunity Act. The Act protects foreign governments from US litigation related to sovereign Acts, but does not apply to purely commercial activity and is often waived by treaty

http://www.irishtimes.com/newspaper/...329471013.html