View the article online at http://citywire.co.uk/money/article/a498614
Injunction MP cries foul over Bank of Ireland bond cut
John Hemming, the MP who exposed Ryan Giggs’ super injunction, is fighting to help pensioners being forced to sell their Bank of Ireland bonds at a loss.
John Hemming, the MP who exposed Ryan Giggs’ super injunction in the House of Commons, has launched a campaign to help investors hit by Bank of Ireland’s decision to buy back its bonds for a fraction of their value.
Hemming is one of group of investors who bought a permanent interest bearing security (Pibs) from Bristol & West building society in 1991. The bond, which pays an interest rate of 13.375%, became Bank of Ireland’s responsibility when it bought Bristol & West in 1997.
Under the terms of proposals issued by the bank this week to raise €4.2 billion (£3.7 billion) these bondholders are being offered a 'haircut' of just 20% of their investments’ face value of £75 million, or the chance to swap the bonds for new shares worth only 40%.
Hemming, the Liberal Democrat MP for Birmingham Yardley, said the move was unfair to the bondholders, many of whom he believed were pensioners.
‘There has to be a better way of treating the smaller investors,’ Hemming told the Financial Times. He cited the 2009 recapitalisation of Lloyds Bank which, although it hit bondholders, did not cause protests. ‘That was done in a way that didn’t hit people that much but it did involve burden sharing,’ he told the paper.
According to the FT, the bonds were trading at 35% of their value before Bank of Ireland’s announcement on Wednesday. Although this indicates the financial stress the bank is under it also suggests investors expected a better deal to emerge.
Bank of Ireland’s move has enraged some institutional investors who, according to Reuters, have formed the BOI Investor Committee and appointed a US legal firm to fight their case. ‘The bank’s LME (liability management exercise) is fatally flawed because it fails to respect the fundamental principle that creditors must be paid ahead of shareholders,’ the committee said in a statement reported by Reuters.
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by Daniel Grote on Mar 30, 2017 at 16:21