The Government is denying that there will be a payout to Anglo junior bond holders, but signs say that the market thinks otherwise. The value of the failed bank's subordinated junior bonds has trebled in recent months, indicating that investors believe that they will be paid.
The Irish Times reports that Anglo bonds that were traded for as low as 12 cent in the euro when the bank was liquidated last year are now trading for 35 cent - and that this value has not fallen significantly since the Government issued its various statements claiming that a payout is highly unlikely.
Taoiseach Enda Kenny commented on the issue yesterday, saying: "I do not see any circumstances, in which junior bondholders will be paid out of the liquidation of the Irish Bank Resolution Corporation (IBRC)."
Traders are now understood to be competing to get a hold of the bonds - they are a risky investment but many believe that the the IBRC (which is comprised of Anglo Irish Bank and Irish Nationwide) liquidation will bring in a lot more than it was expected to, and that there will eventually be a payout.
The long game
These bond holders rank behind a number of parties, some of whom are currently suing the bank. One of them is the family of businessman Seán Quinn, who are suing the bank for €4.5bn. Junior bond holders will not know where they stand until these lawsuits are settled - this could mean waiting until at least 2020.
Patient investors could be rewarded with a significant payout, The Irish Times estimate that there could be enough funds leftover to repay junior bondholders 70 cent in the euro.
Old Ghosts
The state poured as much €35bn into Anglo and Irish Nationwide in 2009 and 2010. The outstanding junior bonds have a face value of €280m - more than the €275m that one year of domestic water charges will bring in.
The issue of a payout to junior bond holders came to the fore when Minister for Finance Michael Noonan made comments in the Dáil, he suggested that the liquidation of the IBRC had gone, "better than expected," and that funds could be made available to pay unsecured creditors.
This contradicted a previous statement from the Government in February of 2013 which said that, "It is not expected that any assets will be available to repay subordinate bondholders."
When accused of backtracking, Mr Noonan told the Dáil, "that was the expectation at the time."
Since then the Government has worked to distance itself from a possible payout. Tánaiste Joan Burton appeared on RTÉ's The Week in Politics, the Labour leader said: "It is completely unlikely to happen because in the queue before the junior bondholders are the Irish people."
The Sunday Independent spoke to Wolfgang Klopfer, chief executive of Munich-based Xaia Investment GmbH, a German company who owned €17m worth of subordinated Anglo bonds before the bank collapsed. He told the paper that the company's board of directors had calculated that they could receive as much as a 100 percent payout.
Special powers
Fianna Fáil finance spokesman Michael McGrath has pointed out that the Government could use special powers to block any excess funds raised from winding up the IBRC being paid to junior bond holders.
But, as Michael Noonan said in his initial comments in the Dáil, if there is money left over, junior bondholders will be entitled to submit claims for payments - if those claims were found to be valid, "then they will legally be entitled to a dividend provided there are sufficient funds available".
