Anglo Irish Debt Exchange Was ‘Negative Inducement,’ Judge Says

The measures the Irish government used to persuade bondholders to take losses as it restructured Anglo Irish Bank Corp. were unfair to the minority of investors who didn’t want to take part, a U.K. court ruled.

Judge Michael Briggs today called the mechanism a “negative inducement” to force bondholders to accept the offer. The case was brought by Anglo Irish bondholder Assenagon Asset Management SA.

The ruling focuses on the legality of so-called exit consent measures under which the nationalized lender offered holders of the bonds a choice between receiving a smaller amount in exchange for their notes or being effectively wiped out. Other countries, including Greece, used similar methods to restructure their debt.

The exchange offer was “fair, transparent” and all note holders were provided with comprehensive notice in advance, the Irish Bank Resolution Corp., the successor to Anglo Irish, said in a statement today. “IBRC is firmly of the view that these securities would have been valueless without the recapitalization of the bank by the Irish State.”

The IBRC said it was given permission to appeal and is “considering its options.”

The case is Assenagon Asset Management S.A. v. Anglo Irish Bank Corp., High Court of Justice Chancery Division, HC11C01320.

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