Inside the world of business
Burning the bondholders no way to achieve economic growth
IT’S BEEN a while since bondholders of Irish corporate or sovereign debt – once the villains of the Irish financial crisis – have been in the news, but yesterday the bondholders debate reared its head again as AIB repaid €1 billion worth of senior unsecured debt, plus interest.
The bond in question had been issued by the bank on October 1st, 2009, with an interest rate of 4.5 per cent payable each year in arrears.
The list of bondholders include an interesting collection of names from the investment world, including Swiss private bankers Lombard Odier Darier Hentsch and Pictet Asset Management Limited, Portuguese bank Banco Espirito Santo and Alliance Global Investors France.
Despite the protests from some groups yesterday, burning senior bondholders was never going to be on the agenda. Throughout the financial crisis, the ECB has remained intransigent about the possibility of burden-sharing with senior bondholders, although there were hints in July that it could be open to some discussion on the topic.
Even disregarding European objections, burning bondholders of AIB or Bank of Ireland is a non-runner. The Government has committed to developing both banks as the two main banking pillars in Ireland. Suggesting that AIB should not repay money lent by groups of international investors, however faceless, three years ago is nonsensical. Issuing bonds is part and parcel of how functioning banks fund themselves, before this financial crisis ever emerged.
While it may gall people that the Irish taxpayer is also now a significant funder for AIB and Bank of Ireland, threatening to burn senior bondholders would be utterly self-defeating in the long term.
With Ireland operating with a skeletal domestic banking system, ensuring the viability and credibility of Irish banks in the international investor community is vital for future economic growth.
Tariff row intensifies as gas firm and regulator go to High Court
Effectively, the regulator wants Shannon LNG, owned by US giant, Hess, to contribute to the cost of maintaining two natural gas interconnectors with Britain.
All other operators in the Irish gas market must also contribute to this, but Shannon LNG says that it should not have to do so as it will not require the interconnectors.
The company will import liquified natural gas from the US, where the fuel is exceptionally cheap at the moment, to its proposed facility at Tarbert, Co Kerry, on the Shannon Estuary, and supply it from there.
The regulator argues that the interconnectors are a critical part of the overall infrastructure that Shannon LNG intends using, and has to be paid for.
Even when the company begins importing from the US, supplies will still have to come via the interconnectors. At present, over 90 per cent of Irish natural gas requirements are imported via this route.
The issue now looks destined for the courts. The first salvoes in a case with Shannon LNG on the one side, and the energy regulator, Ireland and the Attorney General, on the other, are likely to be fired in the High Court today, where it is scheduled for an initial judicial review.