What: USD 1bn of Anglo Irish Bank senior bonds, not covered by the September 2008 guarantee, not secured against Anglo assets. The bonds were originally issued on 2nd November 2006; the ISIN reference for the bond is XS0273602622. You can view its price and its history here. It was trading at 52c in the dollar earlier this year. The bond is denominated in US dollars; at the current exchange rate of EUR 1 = USD 1.37, the bond works out at €730m. Anglo is set to receive a total of €29.3bn from the State.
When: Sometime today 2nd November, 2011
Who (is paying): The bond will be repaid by someone in the Irish Bank Resolution Corporation (“IBRC”, the name of the new company formed by the merger of Anglo with Irish Nationwide Building Society). IBRC’s chief executive is Australian, Mike Aynsley, its chairman is Alan Dukes. IBRC is 100% owned by the State so Minister for Finance, Michael Noonan is the principal Government member responsible for the payment.
Who (is being paid): The identities of the bondholders are not public. Minister for Finance Michael Noonan has described them as “speculative investors”. The Guido Fawkes blog published what it claimed was a partial list of bondholders last October 2010. Senator David Norris began naming them in the Seanad last December 2010 but was told by the chairman Pat Moylan that he was out of order.
Where: The payment will be made by IBRC whose head office is at 18/21 St Stephen’s Green, Dublin 2,
Why: Not clear; but NOT because it is a term of the Memorandum of Understanding with the bailout troika of the IMF/EU/ECB; not because it is in any public agreement with the ECB. Probably because of a political fear that non-payment will jeopardise the continuing €150bn loans provided by the ECB to Irish banks, or will sour the relationship with the Troika so that the continuation of the bailout to the end of 2013 would be put at risk. There has also been some recent talk suggesting that acquiescence now with the ECB’s wishes may result in a reduction in the interest rate charged on future borrowings to fund IBRC.
For more detail on the bond, why it is being repaid and what it means for you as an Irish citizen see here and here.
UPDATE: 2nd November 2011. So the USD $1bn Anglo bond was paid today. Political protest was concentrated in the Dail where Opposition parties called on the Government to hold an emergency debate on the payment – that call was defeated by 77 votes to 38. Sinn Fein called on the Government to ring the chairman of Anglo (or IBRC as it is known now) and instruct him not to pay the bond. Both Sinn Fein and the United Left Alliance walked out of the chamber in protest at the payment and refusal to debate the matter. Sinn Fein’s walkout was met with guffaws from the Fine Gael/Labour benches. The Taoiseach confirmed that the payment made today was not a condition of the Memorandum of Understanding with the troika of the IMF/EU/ECB but did allude to it being consequent to a “commitment” made by the last administration. The Taoiseach said the Government had tried to convince the ECB of Ireland’s case in imposing a haircut on these bonds but that the ECB had been trenchantly opposed. He claimed on one hand that he did not know the identities of the bondholders to, only a few moments later, claim that the bondholders included local councils and non-payment of the bond would result in the loss of jobs – Minister for Social Protection, Joan Burton nodded vigorously along to that claim. The Taoiseach said he did not try to raise the Anglo bond issue at last week’s EU summit because the summit agenda had been set by others and was confined to discussion of the Greek situation, the recapitalisation of EuroZone banks and the expansion in the bailout facility (the EFSF).
This blog sets out to be politically impartial but it seems unavoidable to comment on the poor defence of the Government’s position today. Notwithstanding the fact that Ireland is a minnow in the EuroZone, and Greece’s woes are hogging the headlines, it seems shameful that there was not even an attempt to get the Anglo bond on the agenda last week at the EU summit, even as a subsidiary matter. The Taoiseach seemed visibly shaken when Sinn Fein walked out and it was with a cracked voice that he sought to justify his position in rejecting a debate. The Taoiseach’s contribution in the Irish Times today seems to evidence a communication strategy to manage the public mood this week.
What appears completely cynical is the delay in the publication of the Comprehensive Spending Review. This is a review of Government expenditure in the public sector and was to identify cuts and savings (remember €2.1bn of the €3.6bn budget adjustment next year is to come from these cuts and savings). According to the Memorandum of Understanding with the Troika the review was to have been completed in September 2011 (by the end of Q3, 2011). When Fianna Fail leader Micheal Martin asked the Taoiseach in the Dail for the review in October, he was told it wasn’t yet complete.
There is a second document, called the 3-Year Plan, which Minister for Finance, Michael Noonan said would be published in October 2011. The aim of this document was to set out “in as much detail as possible” the levies and taxes that would be imposed in the next three years, so as to give people clarity and certainty about future taxes, so that society and the economy might have some confidence in making spending decisions. Again, this document has not been published, but the Department of Finance is indicating it will be published on Friday 4th November.
Both documents, which were due to be published before today, will be deeply unpopular in the sense that they will make more tangible, the austerity to be endured so as to cut the deficit (the difference between the Government tax take and Government expenditure) AND to pay bondholders. Could this Government be so naïve to think that by Friday this week, the memory of the €730m bond payment will have greyed?
In relation to our recently defeated referendum on Dáil investigations, it is interesting to note the role of one grossly obese lawyer turned banker, P Sutherland.
Goldman Sachs appear on the list and of course the same Gonzaga Boy is Chairman of Goldman Sachs International. Earlier in the year & in 2010 of course he was urging the Irish Government to pay the bondholders, without of course ever mentioning the Goldman Sachs holding.
Previous Sutherland roles have of course included AIB & most spectacularly of course his chairmanship of BP, where he oversaw cost cutting in particular in the safety area. He was also on the board of the RBS group when it was making various mad & bad decisions.
There is a man who did not want any investigation of his role in Irish banking and its fallout!
It should also be pointed out that Guido Fawke’s “list of senior bondholders” – which is the same list as Norris was reading out – is rather obviously something stitched together to serve a particular agenda. Junior bondholders appear on the list (Deka, for example) as long as they’re decently foreign, while Irish bondhoiders with exactly the same coupons (Wexford Credit Union) are mysteriously absent.
You may have seen my letter in today’s IT congratulating the “establishment” on the defeat of the Abbeylara referendum and suggesting that we will never see a proper public inquiry into the banksters. OK, the wording was not perfect but it is hard to see how an effective inquiry would not damage some reputations. We cannot keep blaming “systemic failures”.
@Niall
It seems to me that at least 2 of the 8 AGs would have got a good grilling at any banking inquiry.
Anglo was a property bank overexposed to the domestic market,anyone buying these bonds was making a future bet on the direction\health of the Irish market.
By Nov. ’06 fundamental numbers indicated that the Irish market was overheated,long overdue a correction.
Anglo was NOT held in the highest esteem by international bankers,confirmed this by embarking on a last ditch disastrous lending foray into a similarly overheated US property market.
One part of the US Loan book has just sold,with the balance ‘scheduled’ to close by end of year.While not confirmed one assumes due to on going ‘negotiations/haircuts’, various market commentators have suggested a 20% ‘burning’ on 9.5billion or a further loss of 1.9 BILLION.
These bondholders are over 18 can read and were fully aware of ALL risks associated here including default.The interesting ‘play’ was with the knowledge that Anglo was selling its US loan book to pick up these bonds significantly below par get paid in full by Anglo and ‘pay’ Anglo with its own money for the US loan book at a discount.
Anyone working on 9.5 billion transaction has the resources and contacts to execute this trade one other great reason to get the list of bondholders.
One last disturbing aspect of this is the precedent it sets.It will now be impossible to avoid paying the remaining,toady the Irish people in relation to Anglo paid 3,3 BILLION to UNSECURED speculators/vulture investors.
‘Mr Kenny said, €3.3 billion in unsecured private debts remained, including the €700 million due for repayment today.’
http://www.irishtimes.com/newspaper/breaking/2011/1102/breaking12.html
(Don’t shoot this messenger again, please ! I am describing the deal, not defending it)
Ireland’s agreement with the Troika gives the latter, of which the ECB is one member, a veto over any plans to “burn bondholders”.
See paragraph 10 et seq. of this letter http://t.co/ztksACtI sent by Lenihan & Honohan on 3/12/2010. It is a crucial part of the “bail-out deal” architecture. Ireland has committed to agreeing its plans in the relevant respects, including “burden-sharing” with bank creditors, with the Troika.
The word “veto” is not used. It does not have to be. Failure to approve has the same effect in contractual terms.
Now, there are those who are suggesting that our government has not tried, and that if they only tried hard enough, the ECB would “cave-in”.
I have no personal knowledge of whether such suggestions have any basis in reality, but I have noticed that Messrs Kenny, Gilmore and Noonan have claimed to have discussed the question with M. Trichet. I have also noticed a lot of abuse directed at Trichet because of his alleged obdurate refusal to countenance any suggestions that the ECB should relax its opposition to bond “haircuts”.
I also note that, contrary to views expressed in many quarters, the IMF is none too keen, either. See p.23 of this http://bit.ly/rxHrgr PDF at paragraph 34, third bullet point.
It does not look to me as if the necessary approval is available from the Troika just now, whatever the future may bring.
What leverage do we have to persuade them to a change of mind ? As long as our borrowing requirement is circa €15 billion, not a lot, in my view.
But what do I know ?
@Fergus, I don’t know what you mean by saying “don’t shoot the messenger again”. You sent a message on Twitter in which you claimed that the Memorandum of Understanding with the Troika contained a term which obliged Ireland to pay the senior unguaranteed unsecure bond at Anglo today. You were asked to specify the term, which as far as I can see, you were unable to do. There’s no “shooting”
With respect to the above, again you haven’t specified what term mandates the repayment of the bond. You say “See paragraph 10 et seq. of this letter” and you attach a letter with just 8 paragraphs and then has 35 pages of additional material. I don’t have the time to look at that “et seq.”
If you want to specify a sentence, why don’t you copy it into your comment?
Taoiseach Enda Kenny who is opposed to burden-sharing of senior bonds in Anglo said in the Dail today that the Memorandum of Understanding did NOT oblige Ireland to repay the bond.
@FOR a compelling and strong argument could be made that there was a element of fraudulent misrepresentation in the Anglo/Irish Govt. ‘transaction’.
The decision to ‘support’ Anglo was based on incorrect assumptions and representations it should have been allowed fail.The ‘perp walk’ yesterday was no coincidence.
[…] https://namawinelake.wordpress.com/2011/11/02/black-wednesday-imf-dependent-4-6m-population-country-w… […]
@nwl completely totally inappropriate but in keeping with your heading and living in the US….shit crap day to be a ‘paddy’
Jimmy Rabbitte: Do you not get it, lads? The Irish are the blacks of Europe. And Dubliners are the blacks of Ireland. And the Northside Dubliners are the blacks of Dublin. So say it once, say it loud: I’m black and I’m proud.
@ NWL,
Leaving aside the right or wrong / justice / injustice of this payment for a moment.
Will Bond rates now start to come down for Ireland?
If Ireland is going to pay back all the guaranteed / unguaranteed bonds of the broken banks etc, then should we not be rewarded by the markets as a trustworthy borrower?
If Ireland’s word is as good as it’s bond then this should be reflected in our bond rates, should it not?
I would find it reprehensible (as I am sure a lot of people would) if we continue to pay back everything and still be punished by the markets (penal rates).
There has to be a bit of give and take, otherwise there is no point in continuing on this farce.
Hence in the short term (tactically) we have lost this 1 billion dollars yesterday. However if rates were to come down because of this, then long term (strategically) it could result in savings on future borrowings.
Or does it really matter? Once a country’s debt is over a certain % of GDP it faces penal bond rates regardless of how honest and trustworthy the word of that country’s Govt is?
Anyway in short to sum up, now that we have shown that we do have the intention to pay, that we are moving towards a balanced national budget (still a few years away but getting there) etc etc, then surely our borrowing rates should start to reflect this.
If not then somebody somewhere has got to call a halt.
@Sporthog, the argument goes that if the bank bondholders are repaid by the Irish state, then national debt increases, and the increase pushes dangerously high national debt into the unsustainable bracket. And if national debt is unsustainable then there is an elevated risk of default. And if there is an elevated risk of default then the interest rates demanded by the market on Irish sovereign debt will increase. Obviously if you think the national debt is sustainable even after paying the bank bondholders then yes, your view should prevail.
Interesting: government pays in full senior debt of a dead bank (Anglo) and at the same time it threatens with total wipe out subs of the only bank in Ireland that’s doing so-so, has avoided state ownership, and has attracted 1B in new capital in the darkest hour of the crisis (BKIR)… does that make sense to anyone?
@john gallaher: We are governed by buffoons. We wholesale the “distressed” Anglo book in the USA to Lone Star at 69c on the dollar, giving away the potential of 20% per annum upside that Lone Star expect to make from the resale of the loans to the existing borrowers – the obvious buyers. But we can’t deal with them for political reasons (embarrassment). Loan Star often state that the last thing they want to be left with is the underlying asset. They live in the real world – our politicians and civil servants don’t and it costs us, as we witness once more their insanity in paying, without a whimper, an unsecured bond when there was no legal basis for issuing payment. You are right, the Americans are incredulous. They just can’t believe it.
Buffoons – our financial lot. You have to admire the Greeks. Now they have cojones!
@wstt at least stay in the deal keep 20% back end piece.But no creativity or strategy.If lonestar is buying you should not be selling.
@wstt there are a few Irish borrowers in the various pools the fun and games will be much different with Lonestar as lender.
They Irish borrowers are about to find out what hardball tactics are.
The office building that Amglo is/was tenant in Boston is owned by a prominent Irish developer,was financed by Anglo.Will post link later but potentially could refinance or purchase his own loan from lonestar at discount to face value.
@wstt this could get all rather awkward !
‘When Dublin property investor Patrick McKillen bought a 21-story Boston office tower for $170 million in 2006, his lender, Anglo Irish Bank, helped find an anchor tenant: itself. Such were the mutually beneficial business ties that once bound McKillen, a Belfast-born developer with a taste for trophy properties, and an Irish bank that made a colossal bet on the U.S. real estate market, where it expanded its lending sevenfold from 2004 to 2008.’
In McKillen, Anglo Irish had a client with U.S. ambitions of his own. In 2006 he bought three Boston properties with about $200 million of Anglo Irish loans through his flagship Clarendon Properties (Holdings), of which he owns 50 percent. The acquisitions included Anglo Irish’s Boston headquarters on Franklin Street.
http://www.businessweek.com/magazine/content/10_42/b4199044778232.htm
@john gallaher; Interesting situation developing with Lone Star. As you say its first port of call will be to the borrowers and it will add 20% to the acquired purchase price of the loan and offer the assets back to the borrowers at a discount to the original par value – because that is what Lone Star does and it is how it makes its money. It has raised $8 billion a few months ago to take advantage of precisely these opportunities.
It believes that the European banks have so much distressed lending in “the belly of the beast” that hasn’t been delivered yet. Not just NAMA, but all the UK and European banks. It’s all building up nicely to a crisis crescendo….. no more kicking the can down the road. Lone Star is waiting with their war chest in the wings. The pragmatists versus the social politicians who mustn’t be embarrassed. Dare anyone say that they have no clothes. The Irish in denial – the first sucker victims. Cash is King!
@wstt the asset stripping and distressed selling by the Irish is very panicked.
All that will be left is non income producing deals in Ireland.
had the pleasure of doing business with Lone Star-best described as in the moving business NOT storage.
these loans will be offered first to capitalized borrowers then split up into smaller pools or sold off individually.
But the Irish borrowers are in for a rude awakening these guys play for keeps.
@nwl
Sorry, the reference is to page 5 of the PDF.
There is no “killer” sentence. But, as one would expect in documenting a facility of nearly €100 billion, the conditionality is elaborate and fairly explicit in every paragraph, if not every sentence. In return for the funding, Ireland agrees to do many things, and one of them is agree all major moves in advance.
I am a bit perplexed at the notion that this might not be the case. My impression had been that observers were fairly clear that the “bail-out” was a MAJOR loss of sovereignty.
All right, Enda Kenny’s reported denial that it’s in the MOU confuses things, but as a predecessor might have said “that’s politicians for ya “.
@john gallaher: Love the description of Lone Star being in the moving rather than the storage business. Fits them perfectly. The only problem is that the soils go to them. We are so obsessed with the niceties of who we sell to and who we won’t sell to that these are the people who inevitably pick up the cherries. They in turn sell to the inferior specimens of society that we demonise (the capitalised debtors), and collect the “dirty” money that is beneath us to touch every time they do it. The losers are the Irish taxpayers.
But in every way we are the losers – with our politicians, our civil servants, our bankers, our collective thinking that allows this to happen. We have neither the expertise, the knowledge, the creativity or the broadness of mind to do it ourselves. Submissive, pandering to our masters, to paraphrase Michael Lewis, we are “bog-ignorant peasants and should never have got involved in matters of high finance’. A vassal state of France and Germany, we should stick to our literary talents – forget competing with Lone Star.
@wstt one the principal reasons i emigrated was the ‘old boy network’ and nepotism rampant in Ireland which ties in with other posts in late 80’s early 90’s.
This was the time of the infamous Johnston Mooney deal involving Forrest Gump sorry Noel Smyth.
‘He was involved with his close associate, Dermot Desmond, in the purchase of the Johnston, Mooney and O Brien site in Ballsbridge in 1991. He advised on a tax-efficient system for part of the transaction that involved offshore companies’
‘Noel Smyth was paid legal fees in excess of £7,000,000 in the case that led to the humiliation of Charles Haughey. There was a half million pound tax dispute over those fees.’
http://politico.ie/politics/5051-noel-smyths-fees-and-taxes-in-haughey-case.html
But i disagree the Irish are every bit as talented sophisticated as anyone working at Lonestar..we had a very nice time working with them!!!
In fact looking forward to conducting more deals currently reviewing the Florida pieces.They are ‘different’ in that willing to leave something for next buyer not overemotional about owning real estate.
@john gallaher; That’s the point I was making. Lone Star will do the deals that the Irish won’t. Pragmatic and profit orientated as opposed to the Irish – too much blind animosity and too much personal begrudgery to deal with the people who will pay the most for the assets. That will be the difference between NAMA making a profit or making a loss. To continue selling to the likes of Lone Star, while it’s great for the debtors and Lone Star, is a fatal policy for the Irish banks and NAMA.
@wstt they also don’t care less who the buyer is,where the money comes from how,its financed no drama cash talks bullshit walks.
2 tests:
1-hold mirror up to confirm buyer is breathing !
2-did the check clear!
as details leak out will post what come across here is some ‘detail’ on breakdown so far.Curios missing a few dollars than whats been reported !
‘Of this amount, approximately 25 of the 61 loans with a face value of $1.5 billion were closed on Tuesday, October 25, 2011. Per the terms of the contract, Wells Fargo expects to acquire the balance of the loans in the fourth quarter.’
http://www.businesswire.com/news/home/20111102007072/en/Wells-Fargo-Contract-Purchase-3.3-Billion-IBRC
@wstt at this point the whole Nama concept is fatally flawed.Mulcahy is really running it what did his old shop make at TOP of market..you guys hired the ‘help’ !!
NAMA is/was a 75 BILLION RE OPPORTUNITY FUND
The filings confirm that Jones Lang LaSalle Ltd’s annual revenues to the end of December last year dropped by 9% from €10.1m to €9.2m — in four years they have more than halved from the €20.4m recorded in 2007.
Read more: http://www.irishexaminer.com/business/kfgbidgbojmh/rss2/#ixzz1cfz28gRN