Anglo Irish Bank Corp. Chief Executive Officer Mike Aynsley said voluntary buybacks of senior debt shouldn’t be ruled out following the lender’s announcement of the country’s largest corporate loss.
“A voluntary buyback, a cooperative situation, is a far different scenario from forcing losses on senior debt holders,” Aynsley said in an interview in Dublin today. “I don’t think anyone should rule out a consensual transaction” to help address banks’ capital shortfalls, he said.
The Irish Central Bank will today publish the results of stress tests which, according to analysts surveyed by Bloomberg News, will require lenders to raise another 27.5 billion euros ($39 billion) of capital. Incoming Irish Prime Minister Enda Kenny wants the backing of other European leaders to impose part of that burden on bondholders after the end of a real-estate boom forced the nation to accept an international bailout in November.
“Our view is that Ireland will look to voluntary buybacks” of senior, non-guaranteed debt of Anglo Irish and Irish Nationwide Building Society, Harvinder Sian, a senior fixed-income strategist at Royal Bank of Scotland Group Plc in London, wrote in a note today. “Is there a risk of an involuntary haircut on senior paper? Yes, but we continue to think it is low,” he wrote.
European Central Bank Executive Board member Juergen Stark said the ECB is opposed to Ireland making bank bondholders share in the costs of a restructuring, Frankfurter Allgemeine Zeitung reported this week, citing an interview.
Anglo Irish, which has received 29.3 billion euros in funds from the state, said today that its 2010 pretax loss widened 38 percent from a year earlier to 17.7 billion euros, a record for an Irish company. The Dublin-based lender, which is being wound down after being nationalized, said in unaudited results on Feb. 8 that it expected a 17.6 billion-euro loss.
Imposing senior bond haircuts on “one or two banks in Ireland” wouldn’t “be wise,” Aynsley said. ”We think the signals that that would send to the foreign investor community would not be productive,” he said.