Ireland's Burn-The-Bondholders Trial Balloon Is Mostly Hot Air (Only $5.2B Out Of $88B Likely In Play)
Ireland's government sent up its first bondholder haircut trial balloon, today, announcing that it may be forced to impose haircuts on some senior bank bondholders. A closer look shows this to be a weak proposal.
Most analysts in Ireland believe that the only bondholders likely to be "burned" are those holding debt in Anglo-Irish and Irish Nationwide. Investors have expected for some time that these "banks" would be wound down, but the other Irish banks, like Allied Irish and Bank of Ireland, are considered "viable" banks and hold considerably more outstanding debt. This expectation was also confirmed by off-the-record comments from some Fine Gael officials, shortly after the elections, which made clear that they intended to follow the same bailout road, with only a few cosmetic changes to please the voters.
If it turns out to be the case that only senior unsecured debt from Anglo and Irish Nationwide is "in play," then we are talking about haircuts on a mere 3.7B Euro ($5.2). See here:
That's 3.7B Euro out of a total 63B Euro in outstanding bank debt which the Irish government has either officially or unofficially guaranteed.
In other words, this is symbolic -- if it happens at all. As we wrote a few weeks ago (see here and here), Ireland's new government has no intention of actually letting the bondholders (which include a number of large European banks) take their losses. This latest threat to some bondholders may be nothing more than a bargaining chip to get the IMF to reduce the interest rate on Ireland's bailout funds.
Even if Ireland does secure a reduction on the interest rate from the IMF, it is unlikely to be a substantial reduction. But even a significant reduction in the interest rate would do little to mitigate the overwhelming burden of the total amount borrowed. To our eyes, this looks like Fine Gael trying to give the appearance of making good on its pre-election, burn-the-bondholder bluster. The inside baseball question of whether Fine Gael or the IMF will be able to save the most face is immaterial as far as bondholders and the banking system are concerned. Whatever happens to the 3.7B Euro of bank debt in question, the Irish taxpayers will still be burdened with bailing out Europe and the European banks to the tune of tens of billions of Euros. The only real question is whether or not the Irish people will continue to accept their fate. Because everyone knows what the obvious solution is.
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Mar 28, 2011 at 1:09 AM
Reader Comments (9)
Florida Republicans say negotiations with Democrats in the U.S. Senate have gone so badly that they are now resigned to a shutdown happening.
http://www.heraldtribune.com/article/20110327/COLUMNIST/110329494/0/API?Title=Wallace-Government-shutdown-may-be-near
http://www.cnn.com/2011/LIVING/03/24/cnnheroes.serato.motel.kids/index.html?hpt=Sbin
By CHARLIE SAVAGE
http://www.nytimes.com/2011/03/27/us/27fbi.html?ref=us
The New York Times editorializes against LePage’s mural removal order
http://new.bangordailynews.com/2011/03/28/politics/the-new-york-times-editorializes-against-lepages-mural-removal-order/
[snip]
The New York Times editorial board added its voice to the national criticism aimed at Maine Gov. Paul LePage’s order to remove a mural of the state’s labor history from the Maine Department of Labor.
In a Monday editorial titled, The Times said: “Gov. Paul LePage of Maine has stooped to behavior worthy of the pharaohs’ chiseling historic truth from Egyptian monuments.”
Titled “He Dreamed He Saw Jong-il,” a reference to the letter sent to LePage urging the removal that likened the mural to propaganda out of North Korea, the editorial also took a jab at the governor’s decision to hire his daughter to serve as assistant to the chief of staff.
Ok now serve the CROW up medium rare......
Boston Globe Union Rejects Deal on Pay Cuts
http://www.nytimes.com/2009/06/09/business/media/09globe.html?_r=1&adxnnl=1&adxnnlx=1301313917-Zz9wRIyQJfsR4xfUK3BVUw
[snip]
BOSTON — After weeks of labor tension and 12 hours of suspenseful voting, members of the Newspaper Guild at The Boston Globe narrowly rejected a proposed package of wage and compensation cuts. As a result, the newspaper’s owner, The New York Times Company, said it would proceed with its threat to unilaterally impose a 23 percent salary cut.
http://www.hedgefund.net/publicnews/default.aspx?story=12338
[snip]
The $20 billion hedge fund, founded by David Shaw, will offer its investment and technology expertise to oil and gas company Reliance Industries, according to a statement from the Indian conglomerate.
Ruminations of Enron...... Larry Summers, what's in your wallet?
http://news.xinhuanet.com/english2010/world/2011-03/29/c_13802196.htm
[snip]
"I take full responsibility for my actions and all the decisions I made at Enron," Shelby told the judge. "No one forced me to do those things," he said.
Shelby pleaded guilty in a plea deal last year to insider trading in exchange for conspiracy and fraud charges being dropped.
Shelby was one of seven former Enron executives first indicted in 2003 on charges that they helped the parent company's senior management to deceive analysts and investors.