A group of Anglo Irish Bank bondholders are set to be paid all of the €267m they are seeking from liquidators of the bust bank, despite the State only getting a fraction of the €30bn it invested as a rescue attempt.
The remains of Anglo are in the Irish Bank Resolution Corporation (IBRC), where liquidators are trying to salvage as much money for people to whom the bank owed money.
The State has got back around €600m so far, and is set to get another €600m shortly as the liquidators make another payment to creditors.
In a liquidation, some classes of creditors are paid before others, depending on how they came to be owed money. For example, employees owed wages will be ranked ahead of shareholders who took a risk to buy shares in the liquidated company.
The new payment will mean that a class of creditors called “unsecured creditors” will be paid in full.
That means that the next class in line for payment are Anglo “subordinated” bondholders, who bought a relatively risky type of the bank’s debt to try and make money.
After that €267m is paid, it’s expected the State will get more money back from Anglo, the Department of Finance said in a statement.
That money is interest payments owed to the State by Anglo on its debts.
But the vast bulk of the €30bn invested in Anglo by the State went on buying Anglo shares, and it’s unlikely the State will get any of that money back.
Shareholders are last in line to be paid out of the liquidation.
Paying bondholders has attracted fierce political controversy, given that the Irish taxpayer had to shoulder the burden of Anglo’s collapse. Sinn Fein TD Pearse Doherty said that paying the bondholders was “a betrayal of the Irish people”.
The State tried to get the Anglo subordinated bondholders to take a write down, but some rejected the payout on offer in that process. In some cases the Government tried to force bondholders to take a write down, but lost a court case brought by an investor who said they were entitled to pursue 100pc of their investment.
Once the bonds remained on IBRC’s books, the bank’s liquidators are obliged to pay creditors in order of seniority.
No timeframe has yet been given for when the bondholders might receive the money.
The liquidation of IBRC, led by Kieran Wallace and Eamonn Richardson of KMPG, had by the end of last year seen almost €250m paid out in professional fees. Finance Minister Paschal Donohoe has said he will use the €1.2bn received by the State to reduce Exchequer borrowing.
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