Anglo Irish Subordinated Bond Exchange `Tantamount to Default,' DBRS Says
Anglo Irish Bank Corp.’s offer to swap its subordinated debt for new bonds is “tantamount to a default” because of the penalties inflicted on investors who refuse to take part, according to ratings firm DBRS.
The lender’s non-senior ratings will be cut one step to D for “Default” after the lender completes the exchange announced on Oct. 21, Toronto-based DBRS said in a statement. The nationalized bank is offering investors 20 cents on the euro in new bonds to those tendering junior debt, and 1 cent per 1,000-euro face amount for those declining to take part.
“DBRS views the proposed exchange as offering bondholders limited options,” the ratings company said. “Should the bondholders reject the proposed exchange, at an 80 percent discount on tendered notes, they face the risk of significant burden sharing.”
A spokesman for Anglo Irish in Dublin couldn’t be reached for comment.
Ireland faces a bill of more than 50 billion euros ($70 billion) to prop up lenders, with Anglo Irish accounting for as much as 34 billion euros, and wants to ensure the burden is shared with subordinated bondholders. Finance Minister Brian Lenihan has vowed to “address the issue” of junior bondholders taking a loss on their investments in nationalized banks.
Holders of the equivalent of about 370 million euros of Anglo Irish’s more-junior securities will get a 50-euro or 50- pound consent fee to give the issuer the right to buy the notes back at 1 cent for each 1,000 euros of securities, the bank also said last week.
To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net
To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net
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