Irish Bank Debt Holders Now Risk Other Bank Rescues (IRL, AIB, IRE)

The situation in Ireland feels like it keeps getting worse, even if it is supposed to be getting better.  Anglo Irish Bank has already been nationalized during the financial meltdown but a group of its junior debt holders have vowed to oppose the Irish government offer that would pay them about 20% of face value.  The holders will receive Irish debt in return, but apparently only if they approve the deal on the table.  There is also a large battle over the proposed government budget as austerity measures are broad and harsh.  In a broader sense of Irish stocks, The New Ireland Fund, Inc. (NYSE: IRL) is holding up better than the public ADR shares of the Irish banks are holding up.

Allied Irish Banks plc (NYSE: AIB), which is not yet to be confused with Anglo Irish Bank, is already almost close to a government entity after its recapitalization and The Bank of Ireland (NYSE: IRE) is still afloat but not exactly in a solid position at all.  The new terms  of the E.U. and IMF bailout could  put further pressure on these remaining two.  The latter has recently tested a guaranteed debt offering and the coming stress tests (or fears of tests) remain a challenge.

Today’s action in the Irish banks shows just how difficult the situation is at the moment as shares rise and fall in the double-digit percentages almost each day.

Allied Irish Banks plc (NYSE: AIB) is down 14% at $0.95 and The Bank of Ireland (NYSE: IRE) is down a sharper 22% at $1.73.  The latter also hit a low of $1.59 this morning, and that is the new 52-week low.  The New Ireland Fund, Inc. (NYSE: IRL) is down only about 2.25% at $6.51 and volume is still very light.

The New York Times threw out a figure that Anglo Irish Bank could cost a sum of more than 34 billion euros, which comes to about 8,000 euros for each of Ireland’s 4.2 million people.  8,000 euros… that is probably more than the domestic annual budget of Guinness for most of its citizens.

JON C. OGG