Written answers
Wednesday, 12 January 2011
Department of Finance
Subordinated Debt
2:30 pm
Brian O'Shea (Waterford, Labour)
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Question 125: To ask the Minister for Finance the extent to which the subordinated bondholders of Irish banks in receipt of State support have been made shoulder some of the burden for their unwise investments; if he will provide a breakdown by institution of the total outstanding subordinated debts and their market values; the total subordinated liabilities paid back in full or in part since the introduction of the blanket bank guarantee in September 2008; the timescale and the mechanism for the imposition of further burden sharing on these subordinated bondholders; the amount of capital he expects to generate in this manner; and if he will make a statement on the matter. [1376/11]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As detailed in the tables below, holders of subordinated debt in the covered institutions have experienced significant burden sharing which reduced the amount of State support that has been required by them. As set out in the tables, several of the institutions have carried out Liability Management Exercises (LMEs) in which their subordinated debt has been subject to buy-backs at very significant discounts. The Deputy will also be aware as part of the Joint Programme agreed with the EU and IMF at the end of November last, the Government is committed to achieving further burden sharing with holders of subordinated debt over the period of the programme. In line with the terms of the agreement and my Statement on Banking in September 2010 this will be achieved through deeply discounted LMEs or, if necessary, and subject to the provisions of the Credit Institutions Stabilisation Act enacted late last year by legislative means. The information requested by the Deputy is set out in the tables following:
| Allied Irish Banks Capital Qualifying Securities | â¬m | Market value of subordinated debtâ¬m | Capital generatedâ¬m |
| Subordinated Debt at 30 September 2008 | 6,247 | 4,347 | Nil |
| Subordinated Debt outstanding at7 January 2011 | 4,775 | 1,246 | Nil |
| Subordinated Debt bought back or which matured between 29 September 2008 and 7 Jan 2011 at full book value | No maturities or buy backs | Nil | Nil |
| Subordinated Debt bought back as part of an LME in the period 30 Sept 2008 to 7 Jan 2011 * | 4,586 | 3,053 * | 1,533 *(The above are subject to Currency fluctuations) |
* Market Value and Capital generated adjusted for â¬13m of costs.
| Anglo Irish Bank | â¬m | Indicative Market Price of subordinated debt | Capital generatedâ¬m |
| Subordinated Debt at 30 September 2008 | â¬4,850 (â¬Equivalent) | ⬠Lower Tier 2 73/81$ Lower Tier 2 58/65£ Upper Tier 2 56/58Tier 1 30/40 | Nil |
| Subordinated Debt outstanding at7 January 2011 | * â¬768 (â¬Equivalent) | N/A â illiquid(US PP USD200mio Lower Tier 2 last traded at 25) | Nil |
| Subordinated Debt bought back or which matured between 29 September 2008 and 7 Jan 2011 at full book value | â¬0 â No Subordinated debt bought-back from the external market at par. | July 2009⬠Lower Tier 2 54/56£ Upper Tier 2 36/38Tier 1 26/28October 2010⬠Lower Tier 2 24/28£ Upper Tier 2 8/12Tier 1 5/8 | Nil |
| Subordinated Debt bought back as part of an LME in the period 30 Sept 2008 to 7 Jan 2011 | â¬4,100 (â¬Equivalent)2009 LME Prices:Lower Tier 2 bought back at 55Upper Tier 2 bought back at 37Tier 1 bought back at 272010 LME Prices:Lower Tier 2 exchanged at 20 â clean up call 1 cent per â¬1,000Upper Tier 2 & Tier 1 Consent fee of 5 | July 2009⬠Lower Tier 2 54/56£ Upper Tier 2 36/38Tier 1 26/28October 2010⬠Lower Tier 2 24/28£ Upper Tier 2 8/12Tier 1 5/8 | 2009 LME: â¬1,800 equity gain.2010 LME: â¬1,600 equity gain. Note this number is draft and unaudited (excludes tax, regulatory and other accounting adjustments) |
Notes:
Please note exchanges rates as at 31 December 2010 have been used where possible in order to provide a corresponding EUR equivalent.
*Included in the total figure of â¬0.768bn of subordinated debt is the sum of â¬0.348bn which relates to 300,000 Non-Cumulative Preference Shares.
The inclusion of these preference shares in the bank's subordinated debt is required by accounting rules notwithstanding that they are now owned by the Minister as they remain technically a debt due to the shareholder on a winding up, albeit one ranking after all other debtors.
| Bank of Ireland | â¬m | Market value of subordinated debtâ¬m | Capital generatedâ¬m |
| Subordinated Debt at 30 September 2008 | 8,474 | Nil | Nil |
| Subordinated Debt outstanding at7 January 2011 | 2,808 | 1,346 | Nil |
| Subordinated Debt bought back or which matured between 29 September 2008 and 7 Jan 2011 at full book value | Maturity (1,350)New Issues (as part of LM)1,345 | Nil | Nil |
| Subordinated Debt bought back as part of an LME in the period 30 Sept 2008 to 7 Jan 2011 | 5,692 | 3,293 | 2,533** Gain includes unwind of hedge adjustments |
| EBS Building Society | â¬m | Market value of subordinated debtâ¬m | Capital generatedâ¬m |
| Subordinated Debt at 30 September 2008 | 217.5 | Indicative Market Value Range (EBS Treasury)â¬141m to â¬152m | Nil |
| Subordinated Debt outstanding at7 January 2011 | 213.1 | Indicative Market Value Range (EBS Treasury)â¬64m to â¬75m | Nil |
| Subordinated Debt bought back or which matured between 29 September 2008 and 7 Jan 2011 at full book value | Nil | Nil | Nil |
| Subordinated Debt bought back as part of an LME in the period 30 Sept 2008 to 7 Jan 2011 | Nil | Nil | Nil |
| Irish Life & Permanent | Nominal Amountâ¬m | Market value of subordinated debtâ¬m | Capital generatedâ¬m |
| Subordinated Debt at 30 September 2008 | 1,348 | 1,525 | Nil |
| Subordinated Debt outstanding at7 January 2011 | 1,467 | 765 | Nil |
| Subordinated Debt bought back or which matured between 29 September 2008 and 7 Jan 2011 at full book value | Nil | Nil | Nil |
| Subordinated Debt bought back as part of an LME in the period 30 Sept 2008 to 7 Jan 2011 | Nil | Nil | Nil |
| Irish Nationwide Building Society | Nominal Amountâ¬m | Market value of subordinated debtâ¬m | Capital generatedâ¬m |
| Subordinated Debt at 30 September 2008 | 316 | 188.06 | Nil |
| Subordinated Debt outstanding at7 January 2011 | 171 | 31.6 | Nil |
| Subordinated Debt bought back or which matured between 29 September 2008 and 7 Jan 2011 at full book value | Nil | Nil | Nil |
| Subordinated Debt bought back as part of an LME in the period 30 Sept 2008 to 7 Jan 2011 | 267 | Nil | 120 |
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