Officials involved in Ireland’s EU/IMF bail-out programme fear that Finance Minister Michael Noonan’s plan to impose losses on senior bondholders in Anglo Irish Bank and Irish Nationwide could have negative consequences for Bank of Ireland and AIB.
Sources have told RTÉ News that Irish Government did not consult the bail-out partners before the Minister gave an interview in which he raised the possibility of burden-sharing with senior bondholders in the two failed banks.
Officials are concerned that if Ireland proceeded with the proposal, it could make it more difficult for AIB and Bank of Ireland to return to the bond market.
Stock market sources have also indicated that Minister Noonan’s plan could dent Bank of Ireland’s ambitions to sell shares to private investors in a rights issue.
Most of the senior bondholders in Anglo and Irish Nationwide are believed to be hedge funds, many of which have bought the bonds at a discount to their original value. So if the Irish Government were to repay the full value, those investors stand to profit.
Earlier this week, Irish Government sources said the Minister Noonan would raise the issue of imposing losses with the EU and IMF in the autumn. But it is understood the bail-out partners will now raise the issue with Irish politicians next month as part of a review of the programme. ‘This issue will have to be cross-checked in July,’ one source said.