Irish banks repaid bondholders €70bn

IRISH BANKS repaid €68.8 billion to senior bondholders and €1.4 billion to subordinated bondholders as their full debt fell due under the two-year blanket guarantee which ended in September, Minister for Finance Brian Lenihan has said.

This meant that no bondholder had to share in the €60 billion recapitalisation costs of the domestic banks.

“As is normal practice when bonds mature, they are repaid – in this instance all were senior bonds and all were Government guaranteed. Furthermore, under Irish law senior debt obligations rank equally with deposits and other creditors,” said Mr Lenihan.

In reply to a parliamentary question from Labour finance spokeswoman Joan Burton, Mr Lenihan said that €124 billion of senior unsecured bank debt was covered under the guarantee.

A further €12 billion of dated subordinated debt was also guaranteed on September 30th, 2008.

Mr Lenihan said that €25 billion of senior bank debt was issued under the extended Eligible Liabilities Guarantee, which covers bonds of up to five years but does not cover subordinated debt.

Mr Lenihan said that talk of a possible default on senior debt at the Irish banks had done “huge damage” to the country.

“A small country like Ireland cannot default without the support of a central bank because you have to have the bank loaded with cash while you’re engaged in such a default and it’s not feasible for us to do this,” said the Minister.

“We really need to face up to this because we’ve allowed the public discussion to become dominated by it. People shouldn’t be surprised if there’s an erosion of trust in the Irish banking system.”

Subordinated bondholders in the Irish banks had absorbed losses of about €7 billion, he said.

Replying to another query from Ms Burton, Mr Lenihan said that under another guarantee given to Anglo Irish Bank last month on “off-balance sheet” derivative exposures such as foreign exchange, interest rate and other hedging instruments, the bank agreed to manage “pre-approved risk limits” set by its board.