ANGLO IRISH Bank said yesterday that holders of more than 90 per cent of its subordinated bonds due for payment in 2014 and 2016 have agreed to swap the notes at a discount.

This follows the Government’s move to change the law to force junior creditors to help pay for bank bailouts.

Investors agreed to exchange €307 million of its so-called lower Tier 2 bonds due in 2014 and €459.5 million of similarly ranked notes maturing in 2016 at an 80 per cent discount to par value, the nationalised bank said in a statement.

By accepting the swap, holders agreed to changes in conditions that will wipe out investors refusing to take part.

The Government is obliging creditors to share the burden of saving the banks after agreeing last month to ask the European Union and the International Monetary Fund for a bailout.

The total cost of rescuing the banking industry may be as much as €54 billion, of which Anglo Irish will absorb about €34 billion, the Government said in September.

The Government passed the Credit Institutions (Stablisation) Bill 2010 banking act earlier this month giving it the power to change bondholders’ rights, including interest and principal payments and events of default. Following a meeting of the Council of State last night President McAleese signed the Bill into law.

Anglo Irish offered to buy back a total €825 million of bonds in exchange for one-year Government-guaranteed notes that pay 375 basis points more than the euro interbank offered rate, or Euribor.

In an offer last month, holders of €750 million of subordinated bonds due 2017 agreed to the same terms.

The lender is convening bondholder meetings this week to insert clauses into the bonds’ documentation giving it the right to repay the notes left outstanding at 1 cent per €1,000 face amount. – (Bloomberg)