Remember Fir Tree?
Back at the start of 2011, these hedge fund upstarts from the Cayman Islands took exception to the attempts by Anglo Irish Bank – as it then was, it’s now IBRC having merged with Irish Nationwide – to impose losses on their USD 200m of subordinated bonds. True, Anglo has required a €29.3bn bailout from the nation as a whole, but that’s just too bad in the cutthroat world of hedge funds. So Fir Tree reached for their lawyers and initiated legal action in New York in February 2011, to stop Anglo imposing any losses on their holding of subordinated bonds.
Reporting in Irish media on the case seems to have dried up, but a search through US court records indicates that in December 2011, Fir Tree appealed a decision by a NY court and the case is set to be heard at an appeal court in March 2013. The record on the US court service PACER – not available without subscription – for the appeal court hearing is shown above – note the dates are in the US format mm/dd/yyyy.
Meantime, Fir Tree continues to be paid its interest as normal. And not only that, Minister for Finance Michael Noonan has confirmed that he has NOT “invited Fir Tree directly or indirectly to take voluntary losses on its subordinated notes. IBRC has a contractual obligation to pay interest and principal on the notes.” By this standard, Fir Tree is wiping the floor with our own Department of Finance.
Although our Minister for Finance Michael Noonan might boast about the €5bn of losses imposed on subordinated bondholders since Fine Gael took office in March 2011 – this, after Fianna Fail had previously imposed losses of some €10bn on subordinated bondholders since 2008 – in truth, there is the potential for a lot of these losses to be clawed back by subordinated bondholders. Fir Tree is fighting like a terrier in New York. And on this side of the pond, in London, a German company won a British High Court case against Anglo last summer which may mean that IBRC has to stump up additional tens if not hundreds of millions of euro in compensation to burned subordinated bondholders. That victory by Assenagon Asset Management has been appealed by Anglo, and we await the outcome of the appeal hearing in 2013. And in London also, former Bank of Ireland subordinated bondholders continue to press their case in the courts for further compensation after their “burning”.
You won’t have heard Minister Noonan or junior minister Brian Hayes recently boasting about the famous €5bn burned by them at a cost to subordinated bondholders. This curious silence might be due to the raft of legal cases, where the ministers presently appear to have the weaker hands.
The revelations about Fir Tree came about in a response to a parliamentary question by the Sinn Fein leader Gerry Adams to the Minister for Finance Michael Noonan in the Dail this week.
Deputy Gerry Adams: To ask the Minister for Finance further to Parliamentary Question No. 240 of 13 November 2012 if he will confirm the reason he has not sought either voluntary or involuntary write downs from Fir Tree on their subordinated debt holdings of Anglo which are costing the taxpayer interest payments every quarter and will cost taxpayer $200 million by 2017; if he will confirm if Irish Bank Resolution Corporation management has sought voluntary write downs from Fir Tree on their subordinated debt holdings of Anglo and if not if he will consider directing IBRC management to seek voluntary write downs from Fir Tree on their subordinated debt holdings; and if he will make a statement on the matter.
Minister for Finance, Michael Noonan : I have been advised that Fir Tree was invited to participate in IBRC’s liability management exercise in 2010 to take a voluntary loss. However, Fir Tree opted not to participate. If write down opportunities present themselves, they will be considered by the Bank. I have not invited Fir Tree directly or indirectly to take voluntary losses on its subordinated notes. IBRC has a contractual obligation to pay interest and principal on the notes.