A GROUP OF AMERICAN INVESTORS who hold subordinated ‘risky’ debt in Anglo Irish Bank are planning to publicly challenge any attempt by the bank to default on their loans, according to new reports this morning.

The Wall Street Journal said the group – who hold about €500m of the bonds, totalling about a fifth of Anglo’s total subordinated debt – will reject any government attempt that will require them to share some of the cost of its capitalisation by defaulting on their debts.

The resistance will be made public at a meeting of bondholders this week being run by investment agency Houlihan Lokey, the WSJ added.

A separate group in a similar position over its investment in ‘risky bonds’ in Irish Nationwide Building Society, which has been nationalised, is similarly trying to negotiate a bargaining position – on foot of an indication by Millhouse, the investment vehicle of Chelsea owner Roman Abramovich, that it would legally resist similar moves.

INBS has a total outstanding liability of €184m in such bonds.

Finance minister Brian Lenihan had said last month that the holders of subordinated debt – which offers a higher yield than regular bonds but is considered ‘riskier’ because it is the first debt to be written off if an institution defaults – may have to take a hit in order to share the full cost of the banking bailout.

The total cost, depending on the activity of the property market, could hit €50bn – driving Ireland’s budget deficit to 32% of GDP. The European limit for this is 3%.