Almost €21bn of senior bank bonds guaranteed by Government

ALMOST €21 billion in senior bonds is guaranteed under the revised Government bank guarantee scheme, new figures published by the Central Bank show.

Some €20.9 billion in senior bonds is covered by the Eligible Liabilities Guarantee scheme, which came into effect when the blanket guarantee lapsed at the end of September 2010.

The banks have issued a further €19.1 billion in unguaranteed senior bonds secured against bank assets and €16.4 billion in unguaranteed senior bonds that are not secured by collateral.

The figures cover the six Irish financial institutions covered by the Government guarantees: AIB, Bank of Ireland, Irish Life Permanent, Anglo Irish Bank, EBS and Irish Nationwide.

The six institutions also have €6.9 billion in subordinated, or lower-ranked, bonds in issue. Holders of subordinated bonds are paid a higher return in exchange for a greater risk of not being repaid.

The Central Bank said it was publishing the bond data on a once-off basis “in the interests of providing public information”. It said the figures were correct as of February 18th, 2011.

At more than €6 billion each, AIB and Bank of Ireland have issued the highest amount of senior guaranteed debt. Bank of Ireland accounts for almost €12.3 billion of the 19.1 billion in senior secured unguaranteed bonds. It is expected the senior unsecured bonds of both Bank of Ireland (€5.2 billion) and AIB (€5.9 billion) will be fully repaid.

Anglo Irish Bank, which is scheduled to be wound down over the coming years, has a total of almost €6.3 billion in issued debt, while Irish Nationwide has €776 million. In both cases, most of this debt takes the form of senior unsecured bonds that are not covered by the guarantee, although Anglo does have €2.9 billion in senior guaranteed debt.

In a note to investors yesterday, NCB Stockbrokers analyst Brian Devine said a coercive senior unsecured debt tender from the non-viable banks was “highly unlikely”.

However, “a friendly tender”, whereby the banks would agree with bondholders on the percentage of the debt to be repaid, “would allow politicians to go back to the electorate with a saving in hand”, Mr Devine noted.