June 15, 2011 / 5:45 PM / 9 years ago

UPDATE 2-Ireland seeks to go after Anglo's senior bondholders

* Ireland asks IMF to help persuade ECB to drop opposition

* Analysts say ECB unlikely to agree to such burden sharing

* Noonan says secondary market guide to size of any losses (Recasts lead, adds comment from Finance Ministry)

By Carmel Crimmins

DUBLIN, June 15 (Reuters) - Ireland will seek to impose losses on over 3 billion euros worth of senior bonds in Anglo Irish Bank [ANGIB.UL] with the support of the International Monetary Fund, Finance Minister Michael Noonan said on Wednesday.

Dublin wants private investors to shoulder part of a 70 billion euro bill for bailing out its banks, but has shied away from targeting senior bondholders in the face of opposition from the European Central Bank.

After meeting with IMF officials in Washington, Noonan said he would enlist their support in trying to persuade the ECB that imposing losses on senior bonds in Anglo Irish would not trigger any contagion because it was no longer a real bank.

“You can’t put your money on deposit in Anglo Irish, you can’t get a loan from Anglo Irish. As far as I am concerned this is not a bank,” Noonan told Irish state broadcaster RTE.

“We don’t think the Irish taxpayer should have to redeem what has become speculative investment. I don’t think it should be redeemed at par,” he said.

Analysts were sceptical about the ECB altering its stance, particularly given wider market jitters about a possible Greek debt default sparking chaos across the currency bloc.

“There is risk that the market will read too much into this as we don’t think the ECB’s position on burden sharing of bank bonds is likely to change, especially now as volatility and tensions in euro-zone debt markets are rising,” Glas Securities said in a note.

“Any shift in policy in regard to bank bonds may be interpreted by the market as a sign of a more fundamental change of general policy not just in regard to bank bonds but perhaps sovereign debt also.”

Anglo Irish has 3.1 billion euros in unsecured senior bonds not covered by a state guarantee. A spokesman for the Finance Ministry said Noonan was referring to those bonds in the interview.

Irish Nationwide Building Society [IRNBS.UL], which is being merged with Anglo Irish, has 601 million euros in unsecured senior bonds not covered by the state guarantee. For details, see [ID:nLDE7211JV]


Dublin is winding down Anglo Irish and Irish Nationwide, which together have swallowed nearly 35 billion euros of taxpayer funds and are the poster boys for the reckless lending that underpinned Ireland’s “Celtic Tiger” boom and precipitated its financial crisis.

Noonan said he had asked the IMF for its assistance in going after Anglo Irish’s senior debt.

“I got an agreement that they understood our position fully and they will work with us to seek to resolve it.”

Noonan said the discounted price of Anglo Irish’s senior debt on the secondary market was a guide for negotiating any possible haircut.

A bond maturing in November this year was trading at 87 cents in the euro compared with 89 cents before Noonan’s remarks, and traders said there was further to fall.

“It’s a very illiquid market so I would expect to see further falls tomorrow,” said Gavin Curran, a trader with Dolmen Securities. “It’s a surprise, we didn’t think they would go after them after the stress tests.”

“If they were able to go after Anglo Irish as a failed entity it’s hard to see them just imposing losses of 20 percent. They would likely seek a discount of 50 percent to make sure there is something in it for them.”

Ireland has sought losses of up to 90 percent on junior bondholders in its banks.

Before Wednesday, the government had said it would only go after senior bondholders in the two failed lenders if fresh stress tests showed they needed additional capital. The tests, published last month, said the duo were adequately capitalised.

No euro zone government has imposed losses on senior bank bonds, which are ranked on a par with depositors, but senior unsecured debt amounting to 320 million euros was subjected to a 41.2 percent haircut when Danish bank Amagerbanken failed in February.

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