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Posts tagged ‘Senior debt’

This is all about Irish Banks Too

  except the poor that can’t pay their TV License

Sellers of Anglo defaults may pay 25.5c on euro

Sellers of default insurance on Anglo Irish Bank may have to pay as much as 25.5 cents on the euro to settle contracts linked to senior debt.

Credit-default swaps traders set final recovery values in auctions yesterday of 74.5 per cent and 76 per cent on the senior bonds, according to Markit Group and Creditex Group. Results varied because of the different maturities of notes being auctioned.

Final values for subordinated debt were set at 18 per cent and 18.5 per cent.

Anglo Irish changed terms on 2017 subordinated bonds, virtually wiping out investors who did not accept an 80 per cent discount on their notes.

Investors can choose not to settle contracts, betting they will get more if losses are imposed on remaining junior notes maturing in 2014 and 2016. – (Bloomberg)

Lenihan logic: heads you win and tails you win for the bondholders

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Irish Finance Minister Demonstrates that he doesn’t believe in Capitalism
By The Fundamental Analyst, on September 24th, 2010
Here again we see another case of those that embraced capitalism on the way up, shudder at the consequences when things go the other way. Take the latest comments from the Irish Finance Minister, from Reuters:
Irish finmin says no chance banks, govt will default
DUBLIN, Sept 22 (Reuters) – It is unthinkable that Ireland or its banks would default on senior debt, Finance Minister Brian Lenihan said on Wednesday.
Opposition politicians and some media commentators have called on Lenihan to force bondholders in Anglo Irish Bank [ANGIB.UL] to take some of the hit for the nationalised lender’s massive losses, which are a major burden on the exchequer.
“It’s unthinkable that Ireland would default on senior debt or that Ireland’s banks would default on senior debt,” Lenihan told Reuters in parliament.
“Ireland is not prepared to be some kind of social experiment for bank default.”
Why is it unthinkable? I’m not up to date with the extent of Anglo Irish Bank’s problems, but if the losses are big enough to eat through all subordinated debt then senior debt is next in line, simple. This is what happens in a restructuring, equity holders get taken out and bondholders take a haircut. Maybe the losses aren’t that big that senior bondholders need to take their lumps, but even so, to make a blanket statement such as the Irish FM has made demonstrates that he is firmly of the belief that bondholders aren’t responsible for their mistakes and that capitalism should be suspended when things go pear-shaped.
 
Comment:
There you have it once again Lenihan is way out of touch with the norms of capitalism
Its all about risk that’s why bondholders get to demand such high interest payments because there taking a gamble and if things go pair shaped they go and take a bath
Lenihan has a logic of heads you win and tails you win for the bondholders and they love him for it!
Maybe it would be better if Lenihan was in charge,”lets shift Cowen “me thinks the bondholders might be thinking”!

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