Tuesday 12 December 2017

BANKING: Anglo offer 'is same as default'

A LEADING ratings agency said that Anglo Irish Bank's offer to buy out investors who hold risky subordinated debt is "tantamount to a default".

Anglo is offering investors who hold €1.6bn in risky subordinated debt 20c in the euro. DBRS ratings agency made the comments as top tier ratings agency Fitch described the Anglo offer as "coercive".

"DBRS views the proposed exchange as offering bondholders limited options," the ratings agency said.It also signalled plans to cut Anglo's non-senior ratings one notch to D for "default".

Earlier, Fitch made an exception to its normal procedure and didn't place Anglo's issuer default rating on "restrictive default", saying that there was an "expression of continuing support for senior creditors by the minister."

BNP Paribas, meanwhile, said the Anglo offer could trigger payouts of $420m (€300m) on so-called credit default swap contracts as investors call in the insurance they took out on the bank's debt.

Mr Lenihan has publicly acknowledged that holders of Anglo's riskiest debt were rewarded with higher interest rates in recognition of the risk they were taking and therefore should also accept the downside risk.

Separately, it was reported that one of the country's leading law firms, Matheson Ormsby Prentice, advised the board of Anglo Irish Bank in July 2008 that the loans to the children of Sean Quinn to buy shares in the bank did not breach company law or constitute "unlawful financial assistance".

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