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Anglo Irish Launches Exchange Offer: Sub Debt Holders To Receive 20% On Existing Holdings
Just under €1.6 billion in sub debt (and $200MM in other sub debt) will be converted into around €300 million of new debt paying 3 Month Euribor (which has recently been surging)+ 3.75%. Bondholders, or opt for a cash alternative, have until November 19 to make a decision if they will agree to booking an 80% loss. Next up: what ratio will the seniors be invited to exchange into? Well, since as we wrote recently the tier includes almost a hundred European major banks plus Goldman, probably 1.001
From the release:
EXCHANGE OFFERS, PROPOSALS AND PUBLICATION OF CONSENT AND EXCHANGE OFFER MEMORANDUM
Anglo Irish Bank Corporation Limited (the Bank) today announces that it is inviting all holders (the Holders and each a Holder) of the securities listed in the table below (the Existing Notes and each a Series) to offer to exchange any or all of their Existing Notes for new euro-denominated Floating Rate Notes due 2011 (the New Notes)
to be issued by the Bank together with the payment by the Bank of any
applicable Cash Amounts (as defined in the Consent and Exchange Offer
Memorandum referred to below) (each an Exchange Offer and together, the Exchange Offers):
Series of Existing Notes
ISIN
Principal amount outstanding
Exchange Ratio
€ Floating Rate Subordinated Notes due 2014
XS0194937503
€325,188,000*
0.20
€ Callable Subordinated Floating Rate Notes due 2016
XS0257752013
€500,000,000
0.20
€ Dated Subordinated Floating Rate Notes due 2017
XS0305277807
€750,000,000
0.20
* The original issue amount of the 2014
Notes was €750,000,000, of which the Bank or its Group holds
approximately €424,812,000. 2014 Notes held by the Bank or its Group
will not be considered "outstanding" for the purposes of determining
whether or not the Meetings are quorate and will not be voted.The New Notes will be issued under the
Euro Medium Term Note Programme of the Bank pursuant to the Information
Memorandum dated 28 January 2010 (as supplemented) and will be
euro-denominated, unsubordinated securities of the Bank maturing on the
interest payment date falling in December 2011 and bearing a floating
rate of interest equal to 3-month EURIBOR plus 3.75 per cent. per annum,
calculated in accordance with the conditions of the New Notes. Payment
when due of all sums of principal, interest (if any) and default
interest (if any) due and payable by the Bank under the New Notes and
under the Trust Deed in respect thereof will be unconditionally and
irrevocably guaranteed by The Minister for Finance of Ireland. The
Minister for Finance's obligations in that respect are contained in the
Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009 as
amended by the Credit Institutions (Eligible Liabilities Guarantee)
(Amendment) Scheme 2010 (as so amended, the ELG Scheme).
The rationale for the exchange (aside from insolvency of course):
The rationale of (i) undertaking the Exchange Offers, (ii) proposing the adoption of the Proposals and (iii) subject to such adoption, the Bank's current intention to redeem any Existing Notes outstanding shortly after the relevant Settlement Date (collectively, the Transaction) is to create additional core tier 1 capital, and strengthen the quality of the capital base of the Bank notwithstanding that the total capital of the Group will be reduced by the Transaction. Certain classes of the Existing Notes currently trade at a significant discount compared to their initial issue price. The aim of the exchange of the Existing Notes and the proposed insertion of the call by the Bank is to enable the Bank to realise the value of the discount between the value of the New Notes and the par value of the Existing Notes, and to optimise and simplify the capital structure of the Bank.
Holders should also be aware of recent statements by the Minister for Finance of Ireland on 30 September 2010 relating to burden sharing by subordinated creditors of the Bank and his proposal for legislation to address such burden sharing (see further "Risk Factors and other Considerations - Burden sharing legislation is proposed by the Irish Government which may affect Existing Notes" in the Consent and Exchange Offer Memorandum), which included the following extract:
"The principle of appropriate burden sharing by holders of subordinated debt, however, is one with which I agree. As can be seen from the figures outlined above, the losses in the bank are substantial and it is right that the holders of Anglo's subordinated debt should share the costs which have arisen.
In keeping with this approach, my Department in conjunction with the Attorney General is working on resolution and reorganisation legislation, which will enable the implementation of reorganisation measures specific to Anglo Irish Bank and INBS which will address the issue of burden-sharing by subordinated bondholders. The legislation will be consistent with the requirements for the measures to be recognised as a re-organisation under the relevant EU Directive in other EU Member States.
I expect the subordinated debt holders to make a significant contribution towards meeting the costs of Anglo."
In summary the Transaction is a voluntary, market based approach which affords a choice to Holders and reflects the current distressed trading levels of the Bank's subordinated debt securities with the primary and overriding objective of increasing the core tier 1 capital of the Bank. The Bank is making a similar offer to holders of its other equally subordinated debt securities.
The rationale of the Cash Exit Alternative (as described below) is to enable participation in the Exchange Offers by Holders who, due to operation of the Minimum Exchange Amount requirement, would otherwise hold an insufficient principal amount of Existing Notes to participate in the Exchange Offers.
And the timetable:
The following table sets out the expected
dates and times of the key events relating to the Exchange Offers and
the Proposals. The times and dates below are indicative only and are
subject to change, including (without limitation) if any Meeting is
adjourned.
|
|
Event
|
Time and Date (London time)
|
|
|
|
Commencement of the Exchange Offers
|
|
|
|
|
Exchange Offers announced. Consent and Exchange Offer Memorandum available from the Exchange and Tabulation Agent.
|
21 October 2010
|
|
|
|
Notice of Meeting and Proposal given in respect of the 2016 Notes First Meeting
|
|
|
|
|
Notice of Meeting, details of Meeting and details of the Proposal distributed to Holders of the 2016 Notes.
|
21 October 2010
|
|
|
|
Notice of Meeting and Proposal given in respect of the 2017 Notes Meeting
|
|
|
|
|
Notice of Meeting, details of Meeting and details of the Proposal distributed to Holders of the 2017 Notes.
|
21 October 2010
|
|
|
|
Deadline for making arrangements to vote at the 2016 Notes First Meeting
|
|
|
|
|
Last
time at which a Holder of 2016 Notes can request a voting certificate or appoint the Exchange and Tabulation Agent (or its agent) as proxy in order to vote at the 2016 Notes First Meeting. Holders should note that the 2016 Notes Exchange Offer is conditional upon the 2016 Notes Purchase Proposal (as defined in the Consent and Exchange Offer Memorandum) being passed at the 2016 Notes First Meeting. |
10.00 a.m. on 17 November 2010
|
|
|
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2016 Notes First Meeting
|
|
|
|
|
First Meeting of the Holders of the 2016 Notes to be held to vote upon the 2016 Notes Purchase Resolution.
|
10.00 a.m. on 19 November 2010
|
|
|
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Announcement of Results of 2016 Notes First Meeting
|
|
|
|
|
Announcement
of whether the Extraordinary Resolution in respect of the 2016 Notes Purchase Proposal has been passed (and, if so, the relevant amendments to the Final Terms in respect of the 2016 Notes) and, accordingly, whether the 2016 Notes Exchange Offer will proceed. |
19 November 2010
|
|
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2017 Notes Expiration Deadline
|
|
|
|
|
Final
deadline for receipt of valid Exchange Instructions in respect of the 2017 Notes by the Exchange and Tabulation Agent, in order for Holders to be able to participate in the 2017 Notes Exchange Offer. |
4.00 p.m. on 19 November 2010
|
|
|
|
Notice of Meeting and Proposal given in respect of the 2014 Notes Meeting and the 2016 Notes Second Meeting
|
|
|
|
|
Notice of Meetings, details of Meetings and details of the Proposals distributed to Holders of the 2014 Notes and 2016 Notes.
|
19 November 2010
|
|
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First date on which Exchange Instructions can be submitted in respect of 2016 Notes
|
|
|
|
|
The
first date on which Exchange Instructions can be submitted in respect of the 2016 Notes (being the first business day following the 2016 Notes First Meeting). For
the avoidance of doubt, Exchange Instructions in respect of the 2014 Notes and the 2017 Notes can be submitted at any time from commencement of the Exchange Offers up to the relevant Expiration Deadline. |
22 November 2010
|
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2017 Notes Results Announcement
|
|
|
|
|
Announcement
of (i) whether the Bank proposes to accept offers to exchange the 2017 Notes and, if so, (ii) the aggregate principal amount of 2017 Notes accepted for exchange and (iii) the aggregate principal amount of New Notes to be issued in exchange for 2017 Notes. |
22 November 2010
|
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2017 Notes Meeting
|
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Meeting of the Holders of the 2017 Notes to be held.
|
10.00 a.m. on 23 November 2010
|
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Announcement of Results of 2017 Notes Meeting
|
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Announcement
of whether the Extraordinary Resolution in respect of the 2017 Notes has been passed and, if so, the amendments to the Final Terms in respect of the 2017 Notes. |
23 November 2010
|
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2017 Notes Settlement Date
|
|
|
|
|
Expected
settlement date for the 2017 Notes Exchange Offer, including delivery of the New Notes in exchange for, and/or payment of any applicable Cash Amounts in respect of, 2017 Notes which have been validly offered for exchange and accepted. |
24 November 2010
|
|
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2014 Notes Expiration Deadline and 2016 Notes Expiration Deadline
|
|
|
|
|
Final
deadline for receipt of valid Exchange Instructions in respect of the 2014 Notes and (subject to the 2016 Notes Purchase Resolution having been passed at the 2016 Notes First Meeting) the 2016 Notes by the Exchange and Tabulation Agent, in order for Holders to be able to participate in the 2014 Notes Exchange Offer and 2016 Notes Exchange Offer, respectively. |
4.00 p.m. on 20 December 2010
|
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2014/2016 Notes Results Announcement
|
|
|
|
|
Announcement
of (i) whether the Bank proposes to accept offers to exchange the 2014 Notes and/or the 2016 Notes and, if so, (ii) the aggregate principal amount of 2014 Notes and/or 2016 Notes accepted for exchange and (iii) the aggregate principal amount of New Notes to be issued in exchange for 2014 Notes and/or 2016 Notes. |
21 December 2010
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2014 Notes Meeting and 2016 Notes Second Meeting
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Meeting of the Holders of the 2014 Notes, and Second Meeting of the Holders of the 2016 Notes, to be held.
|
22 December 2010 (5.00 p.m. in respect of the 2014 Notes Meeting and 5.15 p.m. in respect of the 2016 Notes Second Meeting).
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Announcement of Results of 2014 Notes Meeting and 2016 Notes Second Meeting
|
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Announcement
of whether the Extraordinary Resolutions in respect of the 2014 Notes Meeting and the 2016 Notes Second Meeting have been passed and, if so, the amendments to the Final Terms in respect of the 2014 Notes and/or the 2016 Notes, respectively. |
22 December 2010
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2014 Notes Settlement Date and 2016 Notes Settlement Date
|
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||
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Expected
settlement date for the 2014 Notes Exchange Offer and (subject to the 2016 Notes Purchase Resolution having been passed at the 2016 Notes First Meeting) 2016 Notes Exchange Offer, including delivery of the New Notes in exchange for, and/or payment of any applicable Cash Amounts in respect of, 2014 Notes and/or 2016 Notes which have been validly offered for exchange and accepted. |
23 December 2010
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FINALLY! A bond holder took a hit, I hope this spreads like the plague.
And what a hit! But why no screams of anguish from defaulted-on bondholders? It's the classic dog that didn't bark, which tells me the debt was owned by some central bank. Either that or everyone is counting on Turbo Timmy to rebalance the world and make it all better.
Some subs were making noises a few weeks ago. We'll find out soon enough what kind of fight they'll actually put up.
I think we can safely assume that this was cleared at the highest levels of global power. Because it sets a precedent and sends a clear message: the globally-coordinated carte blanche bailouts of 2008-9 are officially OVER. From this point on, no bank bondholders can assume they're safe.
Haircuts will be in fashion this season :-)
The Danes apparently burned some bank subs a few weeks ago. The EU (see Box 1) and the British are also making some brave noises about how next time the bondholders will share the pain, oh yes. But we have yet to see how they'll really react the next time they get a whiff of grapeshot from the markets. In Ireland, meanwhile, the government continues to insist that senior bank bondholders will never, never lose a penny, despite the enormous losses run up by the bank bailouts: c. €10k-$12.5k per citizen and counting.
Duh, no: they just put in place the mechanism to do so. Subordinated creditors were burned in the UK at the end of March 2009, at the Dunfermline Building Society.
Bond Holders do not take a hit in America. As Munger said, "Suck it up". Yes, even Berkshire got bailed out.
What about the GM/Chrysler Bond holders? If you want to see some bond holders take it up the tailpipe, just keep watching muni's. IMO
Are the banks Unionized? No.
lets keep pretending we can all pay back the unholy fuckload of money we owe each other. whaddya say, pals.
We can't.
This bank (AI) charged an amazing level of fees. But that can never save you from making too many bad loans.
(Reuters) - Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) may need as much as $215 billion in additional capital from the Treasury through 2013 to offset losses and maintain a positive net worth, their federal regulator said on Thursday.
"(Reuters) - Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) may need as much as $215 billion in additional capital from the Treasury through 2013 to offset losses and maintain a positive net worth, their federal regulator said on Thursday."
This is disgusting. But the Treasury will pay, and the docile taxpayers will pay, even if they need 5 trillion in 2015.
The whole world is looking at precedents. This could be the first domino in the global bank-debt restructuring tsunami.
This is really scary. And guess what despite this, markets will make new highs today. As if all is well and this itself is not good enough a proof for european and american lies.
Repo 1.05 /snicker/
It's not a lot of money, but it's a start.
Wow 80% loss, thats like the buzzcut they give you when you join the army!
I have a fantastic investment opportunity for you ;-)...
Audit shows 33,000 'ghost' houses in the Republic (of Ireland) - http://www.bbc.co.uk/news/world-europe-11596357Only gold and silver accepted.
And that figure's a lowball.
The Exchange Offer is just that, an Offer.
It will be rejected by some of the bondholders who will seek par.
There is no bank resolution regime extant in Ireland.
There will be hold-outs.
They will seek the liquidation of the bank.
What might happen in the background is that deals are made by seniors to buy up the outstanding subordinates at above 20 cent, and take a hit on the basis that the seniors are made whole.
It is also worth noting that Anglo while under State ownership has already bought sub debt in the market.
The remaining subbies are very likely hard core.
+1. Excellent summary.
On the basis that the senoirs are made whole...until they arn't. I say no such thing as a 100% guarantee. Although the 100% guarantee thingy would be a good sell on Anglo Irish's part.
Spot on spot on, you are correct. There are going to be more than a few who will balk at this deal. The funny thing is that the subordinate bond holders know that the senior bond holders will be made whole at the expense of them. But I guess 25 to 35 % of something is better than nothing. The reason why jr's always get the bad end of the stick is because they have little power.
Don't underestimate this one, bitchez. The last thing banksters want to hear is the word "Haircut" for ANY of the international brotherhood!
This means battle lines will be drawn: Bond Vigilantes will be roaming the streets shouting: "How can we trust you guys in governments ever again??? What if we need another bailout?? How can we lend out money to banks with out 100% guarantees that the f*-ups won't be covered up????
Another Cramer rant in the making: "They know NOTHING!"
CONSTITUTION OF IRELAND
Enacted by the People 1st July, 1937
Private Property
Article 43
1. 1° The State acknowledges that man, in virtue of his rational being, has the natural right, antecedent to positive law, to the private ownership of external goods.
2° The State accordingly guarantees to pass no law attempting to abolish the right of private ownership or the general right to transfer, bequeath, and inherit property.
2. 1° The State recognises, however, that the exercise of the rights mentioned in the foregoing provisions of this Article ought, in civil society, to be regulated by the principles of social justice.
2. 2° The State, accordingly, may as occasion requires delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good.
Good work, Mr Wellesley. I think 2.2 is commonly known as a licence to loot.
They won’t use it.
It would require a Statute specifically directed at the bondholders of Anglo Irish Bank would immediately find fault under other articles of the Constitution.
So the Statute would necessarily have to include ALL bondholders, of ALL banks AND of ALL Corporations.
Also, the Citizens would quickly realise that if Statute can be enacted to punish Subordinate Bond Holders why can it not be enacted to punish Senior Bondholders.
It is merely a negotiation ploy, and one more for local consumption.
The Government is on the ropes and wants’ to appear as if it is doing what is best for the Citizen.
It would have done better not to have guaranteed Anglo Irish Bank and Irish Nationwide Building Society in the first place.
I think you are right. Misdirection is not only used by magicians.
The first of many I imagine.
Horatio old bean,
2.2 is generally used to compulsorily acquire land for the purpose of infrastructure. The land (property) owner is generally paid well above market value.
"The land (property) owner is generally paid well above market value" - I bet they are. It gives the infrastructure planners the power to make a lot of people very rich. I wonder if they have any current vacancies?
Ireland, North and South, is going to be an interesting place over the coming months and years. The cuts in NI have went down like a lead balloon. I was listening to the local radio this morning and people were openly calling to get the people out on the streets. Some people are clearly ready for a rumble. There is a union organised rally in Belfast on Saturday; so that will be the first opportunity for a bit of madness for TV consumption.
We can only hope that greater unemployment does not give rise to paramilitary growth.
As I am sure you are aware Norther Ireland is a particulary messy and violent politic.
It can move from general discontent to blowing up babies within months.
I fear it will lead to paramilitary growth. There are at least three republican groups operating at the minute. Things are slightly less worrying on the loyalist side. I grew up in Belfast during the 70s and 80s and it was absolutely bonkers at times. We need to avoid a return to that at all costs. Who knows, the cuts and subsequent financial meltdown may even prove to be a uniting force - but I wont hold my breath.
Another indicitive story from the Emerald Isle...
Local authorities owed €25m in loan arrears - http://www.rte.ie/news/2010/1020/housing.html
Well, the world now knows what this crap paper is actually 'worth'. So who will be next up, and next after that, and next after that...
Ahhh, mmmmm, but, wait a frickin' minute. I had my Anglo Irish bonds marked at par.
This is not fair.
Chickenshit
Interesting discussion on irisheconomy.ie
Who are the subs? Who are the seniors? What is law?
http://www.irisheconomy.ie/index.php/2010/10/21/anglo-subdebt-buyback-offer-announced/#comment-85698
Of course Tyler, you do realize that disseminating news of this nature within the borders of the United States is treason?
I envision that out of bank bond defaults like those of Anglo Irish Bank where some bond holders are not paid in whole by the national central bank, and out of a continuing falling, FXE, from 138.78 will result in further stock deflation, and then a stock liquidity crisis will emerge, where there will not be enough buyers for sellers of bonds as well as stocks, causing small business failures and banks to become sorely decapitalized, resulting in the president of the ECB arising to be an “Eurozone credit seignior” and provider of liquidity to Europe. Despite my report that the Deauville Task Force Fails To Provide A Framework Agreement For European Economic Governance, I also believe that framework agreements will be announced in Europe providing for fiscal federalism giving a whole new meaning to the term European Economic Governance. Yes, I foresee a greater fiscal union. Fiscal federalism will result in the Eurozone evolving into a region of global governance where national sovereignty is a concept of a bygone era.
The word Segnior comes from old English and means top dog banker who takes a cut. Many Europeans will come to trust in him, and conduct their economic affairs through him, as he will oversee all banking, lending, credit and investment throughout the entire Eurozone. The word, will and way of the Seignior will be the law of the Continent.