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Dublin: 4 °C Wednesday 26 February, 2020

AIB subordinated bondholders threaten to sue government

Angry bondholders met on Friday to discuss the prospect of court action if they’re asked to take a second haircut.

Image: Peter Morrison/AP

A GROUP OF INVESTORS with subordinated bonds in Allied Irish Banks met on Friday to discuss the prospect of suing the Irish government, it is reported.

The Daily Telegraph suggests that the bondholders – which include massive global insurance and pension funds – held talks on whether to pursue legal action if they are forced to take a second ‘haircut’ on the value of their bonds.

Bondholders were already forced to accept a haircut of between a third and a half on Tier 1 and Tier 2 bonds, but amid suggestions that the bonds could face further discounts, law firm Bingham McCutchen organised a meeting and conference call on Friday to examine whether bondholders wanted to actively resist further reductions to the value of their investments.

AIB’s bondholders have been mentioned as a potential target to share some of the state’s financial burden for having to nationalise the bank, with a further recapitalisation due from EU-IMF funding before the end of the year once the Budget is passed.

The latest action is unusual, the Telegraph notes, in that the bondholders involved are ‘long-term’ investors who are not involved in short-term speculation.

“Many of these funds are not going to want to touch Irish paper for a long time,” a source told the paper. “I hope governments realise they are angering precisely the people they are going to need to convince to buy new bonds.”

Bond holders in Anglo Irish and Irish Nationwide – most notably Russian oil billionaire and Chelsea FC owner Roman Abramovich – have also threatened legal action over any government plans to restructure their bonds.

Anglo bondholders, however, will meet later this month to finalise a deal which would see their bonds devalued by 80%.

Read more at the Daily Telegraph >

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About the author:

Gavan Reilly

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