Bloomberg News

Irish Widen Laws as Bank of Ireland Bond Burden Sharing Pursued

October 28, 2011

(For more on Europe’s debt crisis, see EXT4.)

Oct. 28 (Bloomberg) -- Ireland’s government broadened emergency bank laws as it prepares to inflict losses on the remaining junior bond holders at Bank of Ireland Plc, the country’s biggest lender.

Lawmakers widened the Credit Institutions (Stabilisation) Act 2010 last week to allow the Finance Minister seek a court order imposing losses on subordinated bondholders on “systemic and financial stability issues,” Dublin-based Finance Ministry spokesman Eoin Dorgan said in an e-mailed response to questions.

Previously, the minister was only able to seek such an order to preserve or restore the financial position of a “relevant institution”, he said. Ireland, which injected 62 billion euros ($87.8 billion) into its debt-laden financial system, has saved a further 15 billion euros by sharing losses with banks’ subordinated bondholders.

It may not end there, with Bank of Ireland needing to raise a further 400 million euros to complete its 5.2 billion-euro recapitalization.

“The government will still be seeking burden sharing with remaining subordinated bondholders in Bank of Ireland,” Dorgan said by telephone.

Bank of Ireland has generated 4.5 billion euros of capital since 2009 by exchanging junior debt for cash or equity at discounts of up to 90 percent of face value.

About 600 million euros of Bank of Ireland subordinated bonds remain outstanding, largely as a result of investors not taking up previous offers, according to Glas Securities, a Dublin-based fixed-income firm.

Bank of Ireland spokeswoman Anne Mathews declined to comment.

--Editors: Dara Doyle, Keith Campbell

To contact the reporter on this story: Joe Brennan in Dublin at jbrennan29@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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