EU-IMF push to make bondholders share burden

Dreaded_Estate

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EU-IMF push to make bondholders share burden - The Irish Times - Fri, Nov 26, 2010

The negotiators are taking legal advice on the steps required to ensure all classes of bank bond investors assume a burden in the restructuring process. One of their prime concerns is to avert the threat of an immediate court challenge from any senior bondholder or a court objection at a later date.
Several proposals are on the table, said a source. At present attention centres on two similar schemes. In the first, bank debt would be converted into equity shares. In the second, bond investors would be given the choice of injecting fresh capital into banks or face a cut in their investment.
The source said there was a “common understanding” between delegations from the EU Commission, the European Central Bank and the IMF that senior and junior bondholders should each pay a share of the rescue costs.
The first step would be to seek to “persuade” senior bondholders to participate in the bailout, said the source. “If that doesn’t succeed, the question is how can you force them in a legally-sound way.”
What are the bets the government are trying to continue to protect bondholders in order to save face
 


He3

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MPB

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Who is giving the legal advice?
Arthur Cox. I believe they are also acting for the Bondholders, the Banks and the Dept of Finance:rolleyes: but we are assured that there is no conflict of interest and the public interest will always be best served. :D
 

Squire Allworthy

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Good to see a bit of sense entering into this now. It highlights how light weight the Irish negotiators have been.

What are the bets the government are trying to continue to protect bondholders in order to save face

Pride comes before fall, and fall will be very evident by lunch time today.
 

polarbear

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Might be a bit early to call but I smell a FF general election landslide. Take the monster out of the box, wave it at everyone for a good scare, then put the monster back in the box, the end. It's a basic film plot technique. Works eeeeeevery time. Not saying they've the wit to do it deliberately....but....
 

Dreaded_Estate

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Might be a bit early to call but I smell a FF general election landslide. Take the monster out of the box, wave it at everyone for a good scare, then put the monster back in the box, the end. It's a basic film plot technique. Works eeeeeevery time. Not saying they've the wit to do it deliberately....but....

What do you think they can pull out of the box?
 

johnfás

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This is what quite a few of us here have said all along. It would want to be a bloomin' big chunk of the debt though.
 

HarshBuzz

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lads, you are wrong

goosebump and tonic said so
 

goosebump

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This is a really welcome development, and will be a huge boon for the taxpayer if it comes off, even in part.

I still wouldn't get my hopes hope, however. The key sentence in the article is the bit about avoiding a legal challenge. I think what they're probably banking on an elaborate game of bluff in an attempt to get the senior bondholders to collaborate in some sort of rescue mechanism. It would be a huge leap for them to actually trying and force the bondholders into an arrangement.

I suppose the fact that the ECB/IMF are going to capitalise the banks for the next 3 years probably means they can play a bit more fast and loose, in that AIB and BOI won't suffer as much of a backlash.

Somebody on Morning Ireland this morning mentioned the 'Standstill' arrangement that Dubai entered into on its sovereign debt, where they agreed to a 5 year moratorium on bond maturity with a 1% pa coupon. Maybe that's an option.
 

HarshBuzz

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^^

it's like some sort of post-modernist statement of irony

maybe something about the fluidity of personal identity and the malleability of core belief systems. That must be it goosebump, you're a performance artist?
 

DaveM

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Dan O'Brien just on Pat Kenny talking about this... definitely worth a listen when they put it up on the website later.

The bottom line is the banks' bondholders are being protected for the sole purpose of stability in the eurozone. That makes it a problem that extends way beyond Irish taxpayers. Our sovreign debt is our own problem and one we will have to pay for, however the basic principle of the Irish taxpayer covering the debts of private companies for the benefit of people other that the Irish taxpayer is plain wrong. If the ECB wants to protect bondholders for the good of the Euro then the burden has to be shared across the entire eurozone. If our negotiators would only grow a pair this should be a simple concept to drive home.

Remember, the initial reason we were given for the government underwriting back debt was that the bondholders were the same people who were buying government bonds and if we burnt them on bank debt we would be locked out of the sovreign market. Well, we're locked out of the sovreign bond markets so that argument is history. Why should the Irish people alone pay private debts to protect the whole of the eurozone???
 

HarshBuzz

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The institutions who got paid in full on maturing Anglo bonds in September mustn't be able to believe their luck\the stupidity of the Irish authorities
 

goosebump

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Remember, the initial reason we were given for the government underwriting back debt was that the bondholders were the same people who were buying government bonds and if we burnt them on bank debt we would be locked out of the sovreign market. Well, we're locked out of the sovreign bond markets so that argument is history. Why should the Irish people alone pay private debts to protect the whole of the eurozone???
I think it was more to do with the impact it would have had on AIB and BOI, although the State would probably have taken a hit too.

That appears to be the paradigm shift at this stage. If both our banks and the State are out of the market, we can leave the EU/ECB to take up the fight. The eurozone in its entirety has much more padding to take a hit than ourselves alone.
 

goosebump

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How much senior debt has Anglo left outstanding?

In the middle of last year, it was circa. €19bn. According to Brian Lucey, €7bn was redeemed in Sep 2010, which would leave €12bn.

Is this correct?
 

GDPR

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EU-IMF push to make bondholders share burden - The Irish Times - Fri, Nov 26, 2010



What are the bets the government are trying to continue to protect bondholders in order to save face
Why would the Government lose face if the senior bondholders were to be made loss share?

The Government were doing as the people whose support we needed, the ECB & the EU, said we must do.
If the ECB & the EU have now changed their policy and will support us in their NEW policy, the Government would have absolutely no problem with that, why would they?
 

corporal punishment

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What's the differasnce between subordinate and senior with reference to bondholders?. Sorry for the newbie question.
 


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