It Paid Some Bondholders in ‘World's Worst Bank’ to Hold Nerve

(Bloomberg) -- For some investors in the former Anglo Irish Bank Corp., it paid to hold their nerve.

The Irish government in 2013 decided to close the lender and sell its remaining assets. Most junior bondholders sold their securities back to the bank in 2010 at 20 percent of their face value after the government threatened larger losses, but some held on.

The liquidators confirmed that, “given the success of the liquidation to date, it is their expectation that there will be further funds recoverable to the state following repayment of other creditors, including subordinated bondholders, ” Finance Minister Paschal Donohoe said in a statement in Dublin on Tuesday.

Former Irish Deputy Prime Minister Eamon Gilmore called Anglo Irish the world’s worst bank in 2010, the year Ireland sought an international bailout. Taxpayers rescued Anglo Irish in 2009, as it toppled under the weight of bad real estate loans, at a cost of about 30 billion euros ($34 billion).

Junior bondholders were owed 270 million euros, according to documents drawn up by bank directors at the time of the liquidation. Any efforts to avoid payment wouldn’t stand a constitutional challenge, the finance ministry said on Tuesday, adding it was unclear when the bondholders would receive their cash.

The liquidators confirmed they will start the payment of the final dividend of 50 percent to admitted unsecured creditors in coming weeks, the finance ministry said. All admitted unsecured creditors will receive 100 percent of the amount owed to them since liquidation, the ministry said.

The payment for the state, as the largest unsecured creditor with claims of about 1.2 billion euros, will be used to reduce borrowing, the ministry said.

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