ANGLO IRISH Bank’s sale of its US loan book and the takeover of Irish Nationwide Building Society were “sovereign acts” and do not have jurisdiction in US courts, the bank argued in a lawsuit taken in New York by one of its bondholders.
Anglo has claimed the sale of the $10.1 billion (€7 billion) US loans and the merger with Irish Nationwide were “not commercial activity” and, that because it was State-owned, it could not be sued.
The bank made its case in a letter filed with a Manhattan court yesterday. It was responding to an order by US district judge Paul Gardephe to explain whether it planned to merge with Irish Nationwide and sell its US loans.
US hedge fund Fir Tree Partners sued the State-owned bank in February to stop it merging with Irish Nationwide or selling off assets before it was repaid $200 billion in bonds held by the fund. Lawyers for Anglo told the judge that the bank would raise cash from the sale of the US loans that would strengthen the bank’s ability to pay debts as they fell due.
The claim that the takeover of Irish Nationwide would damage’s Anglo was “groundless”, the bank argued, as the two institutions rely on “significant Irish Government and central bank support”.
Anglo said its actions were taken to comply with Government legislation and Irish court orders to merge and wind down the two as part of the “broad policy goal of stabilising and preserving the Irish economy and banking system”.
The bank said the Government’s decision to order the merger with Irish Nationwide underlined the bank’s identity as being owned by a sovereign state.
The bank officially put the US loan book up for sale on Wednesday and is signing confidentiality agreements with prospective buyers in the sale process.
Fir Tree has argued that Anglo sold the bonds it holds under New York commercial law and that the bank was operating as a commercial entity and so must adhere to the terms of the bond agreements.
The bank said Fir Tree’s “urgent” attempts to block the sale of the US loans and the Irish Nationwide takeover didn’t change the fact that such a move was barred by the US Foreign Sovereign Immunities Act.
Anglo claimed that the US loans amounted to less than 10 per cent of bank’s total assets at the end of 2010. This fell “far short of demonstrating a sale of all of Anglo’s assets ‘as an entirety or substantially as an entirety’ ” as claimed by Fir Tree, the bank argued.
The court had given Anglo until close of business on Wednesday to explain its plans.
Meanwhile, Aflac, the largest seller of supplemental health insurance in the US, said it made a loss of $77 million (€54 million) on an investment in Allied Irish Banks during the second quarter.
– (Additional reporting: Reuters, Bloomberg)
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