“You wanna hear a great story”
So starts the Bloomberg TV interview with David Tepper, an American hedge fund manager and the founder of Appaloosa Management. Zerohedge has the video here, though the focus of the Zerohedge blogpost is not what we’re interested in here. David tells us about his dealings with Bank of Ireland subordinated bonds, from about 15:00 into the video and here’s the abridged transcript
“We invested in the Bank of Ireland… and we bought their bonds, subordinated bonds…They [BoI] wanted to ‘cram us down’ … So we took them to court.. We were gonna go into the English and Irish courts to fight the Bank of Ireland, and fight the Irish Government for that matter…We finally won at the beginning of this year… The debt was trading at 40/50 cents…..So the Bank of Ireland this year, goes and issues a new issue, of the same debt…. a month and a half ago….the debt is now trading at 115..The only reason it is worth buying, is because we fought it, and we won.”
He also says that he was willing to invest in the equity of Bank of Ireland at what appears to be the same time as Minister for Finance Michael Noonan sold 35% of the bank to the consortium of North American investors including Wilbur Ross. It seems as if that deal might benefit from some further scrutiny to see exactly how good it was for the country which has shoveled €4.7bn gross into Bank of Ireland.
But the interview also begs the question over how haircuts on subordinated bondholders were arrived at, and when Minister Noonan was quizzed on this last week, he merely said “I understand that these transactions were commercial decisions for the Institutions following consultation with their financial advisors”
So how effective was the subordinated bondholder buybacks in 2008-2012 when €26bn of subordinated bonds were redeemed for €12bn and there were total haircuts of €14bn. Could we have achieved billions more?
[See here for details of the burning of subordinated bondholders]