MINISTER FOR Finance Michael Noonan is considering whether to inflict losses on the subordinated bondholders who shunned Bank of Ireland’s cash offer on sterling bonds with a face value of £75 million (€86 million).
Bank of Ireland offered to pay the bondholders 40 per cent of the face value of the bonds, which were originally sold by Bristol West Building Society, but only investors holding 39 per cent of the debt, or £29 million, accepted.
“The issue of burden-sharing with outstanding subordinated bondholders is being considered at present,” said a spokesman for the Department of Finance.
Measures over remaining subordinated bondholders at the banks may come in amendments to the Central Bank and Credit Institutions Resolution Bill next week.
The Minister has warned that bondholders refusing voluntary discounted offers for their debt would face more severe losses.
He can also seek a Subordinated Liability Order in the High Court under the existing bank restructuring legislation, the Credit Institutions Stabilisation Act, to force losses on bondholders.
The bank cancelled a debt buyback on the former Bristol West bonds in June, citing administrative difficulties, before making a fresh cash offer in August.
Just 12 per cent accepted the offer in the first aborted buyback.
Bank of Ireland took over Bristol West in 1997. The bonds were issued to about 3,000 investors, many of them pensioners.
Bank of Ireland raised about €2 billion of €4.2 billion in cash required to meet higher capital ratios from forcing losses on bondholders. The bank said in August it expected to raise another €400 million from further burden-sharing with bondholders.
Some €17 billion has been generated through buybacks and debt for shares swaps with subordinated bondholders at the banks.
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