Anglo bondholders 'face losses'

 

The Government will seek to impose losses on senior bondholders in Anglo Irish Bank, Minister for Finance Michael Noonan has said.

He was speaking to reporters in Washington, where he was meeting US treasury secretary Timothy Geithner and International Monetary Fund officials.

He said about €3.5 billion of senior unsecured, unguaranteed bonds issued by Anglo and Irish Nationwide should have losses imposed on them.

Mr Noonan said he had discussed the issue with the IMF, which supported the strategy. He said these banks are no longer normal entities and are more like warehouses for bad debts.

In that context, he would be going to Ireland's European partners to propose significant cuts in the money to be paid to the bondholders.

"We don't think the Irish taxpayer should redeem what has become speculative investment - we don't believe it should be redeemed at par," Mr Noonan said.

Ireland, which has injected a combined €34.7 billion into Anglo Irish and Irish Nationwide over the past two years, is merging both lenders and winding down their assets over a 10- year period.

The Government had previously said it wouldn't seek to impose losses on senior bondholders unless the lenders need additional capital. The central bank said last month neither would need further cash injection.

Mr Noonan also confirmed he had asked Mr Geithner to support Ireland's effort to secure a cut in the interest rate paid on the European tranche of the bailout. He said Mr Geithner had agreed to support Ireland's effort and would speak with France in connection with this.

Mr Noonan met acting director of the IMF John Lipsky and Mr Geithner in Washington late yesterday, before attending a reception at the residence of Ambassador Michael Collins.

He is also meeting the head of the US Chamber of Commerce, Thomas Donohue, today.

During his US visit, Mr Noonan has been emphasising record growth last year in the Irish export sector and a 14 per cent reduction in unit labour costs.

He reassured investors that there would be no change in Ireland’s 12.5 per cent corporate tax rate.

In an interview yesterday with CNBC television, Mr Noonan said: “The 12.5 per cent corporate tax rate is not negotiable. What we’re being asked to do is to change it for the sake of a lower interest rate.

"We’d rather pay the higher interest rate, and we’ll continue to pay it if the quid pro quo is any change in our corporate tax rate. We’re not for turning, as Lady Thatcher said.”

Additional reporting: Bloomberg