US vulture funds take on IBRC in $1 billion case

Two so-called vulture funds in the United States, which hold $75 million of subordinated bonds issued by the former Anglo Irish Bank, are threatening to scupper an attempt by the bank's liquidators to protect $1 billion of its US assets from seizure by its creditors.

The Irish Times understands that the funds, Burlington Alpha and Burlington Beta, are linked to Elliott Management, the giant hedge fund controlled by US billionaire Paul Singer.

Mr Singer is one of the US Republican Party’s biggest contributors. One of his funds recently won a $1.3 billion subordinated bond case against the Argentine government over its sovereign default of a decade ago.

Burlington’s lawyers declined to comment on the funds’ links to Mr Singer, while Mr Elliott did not respond to requests last night for comment.

Kieran Wallace and Eamonn Richardson of KPMG, the special liquidators to Irish Bank Resolution Corporation (IBRC, formerly Anglo), have applied to a US bankruptcy court for Chapter 15 protection for its $1 billion of US assets. This would prevent bondholders and other creditors from seizing its US assets until the bank's wind-down in Ireland has been completed.

The Burlington funds have objected to the application on the basis that the liquidation “strips away” most of the protection normally afforded to creditors in an insolvency. IBRC is being liquidated outside the normal insolvency regime, under a law passed by the Dáil in an all-night session.

The case is due for hearing on Friday. The vulture funds, who it is understood bought the $75 million of Anglo debt from Fir Tree Capital within the past year, have asked for the hearing to be delayed for two weeks. Fir Tree lost a separate case over the loan notes against IBRC 18 months ago.

In court documents, the Burlington funds said they wanted the court to allow discovery of material relating to the role of Minister for Finance Michael Noonan in IBRC's liquidation, and access to documents that would cover the transfer of IBRC's assets to the National Asset Management Agency.

The funds said “potential conflicts of interest” may be “hanging over” the IBRC liquidation. They said the law to liquidate IBRC gave unfair advantage to the Government over the rights of other creditors.

“[The funds] will show the Irish Government took deliberate and inappropriate actions. The process is being run by the Irish Government, for the sole benefit of the Irish State,” they said.

A consortium led by developer John Flynn also filed an objection to the Chapter 15 proceedings this week, arguing that the proceedings are designed to "frustrate" an action by them against IBRC.

The IBRC liquidators declined to comment yesterday.