THE IRISH Stock Exchange yesterday announced the controversial five-year Anglo Irish Bank senior, unguaranteed and unsecured bond had ceased to exist as a security that could be bought and sold. A one-line statement simply said the listing of and trading in the bond had been cancelled.
This marked the repayment of €1.25 billion to senior unguaranteed bondholders at the full face value of the debt, meaning anyone who held the debt received 100 cents in the euro of its value.
Banks hold a pool of liquidity – effectively cash – worth billions of euros in their treasury operations.
State-owned Irish Bank Resolution Corporation, formerly Anglo Irish Bank, is no different. The bank’s funding comprises inflows and outflows of cash from the bank’s various operations.
The inflows of cash include loan repayments from customers, some of the €5 billion in cash coming from the recent sale of Anglo’s US loans and payments from other institutions on counterparty agreements related to foreign exchange transactions, for example.
The outflows could include payments on other debts as well as payments going out of the bank on foreign exchange transactions.
The instruction to repay the €1.25 billion bond is automatic, based on date of maturity. The money is paid through a clearing company – in this case Euroclear, the Brussels-based settlement company owned by a group of banks.
The money is channelled through the company to a custodian, which manages the bond for the investors or which could own the bond. This could be an investment bank, for example.
The way in which the bond is repaid means the IBRC does not know the bondholders’ identities. It is unlikely the original investors in 2007 held the debt yesterday given how its value has fluctuated over concerns about Anglo and whether the bond would be repaid in full.
irishtimes.com
See our video of Occupy Dame Street activists protesting at the repayment of €1.25 billion to unsecured bondholders of the defunct Anglo Irish Bank
