- Sep 5, 2007
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 faceThe 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 doesnt succeed, the question is how can you force them in a legally-sound way.