Wall Street and foreign banks making money from Irish misery

Sceala Clann T.D. Location: Derry roots

I totally agree with Chanfrik. The Irish are not being given charity by Europe. Ireland is being encouraged to borrow even more money by Europe. Why? Europe, specifically the French and German banks and the British banks, are going to win win. These foreign banks have already made billions out of Ireland's misery. They do not care how much you suffer.
They are as bad as the worst of Wall Street.
You guys might not get wind of this in Ireland. The vultures.
You should know what is going on.
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Wall Street Journal
By MATT WIRZ
The dysfunctional family drama playing out between Dublin and Brussels has attracted an avid audience of U.S. hedge-fund managers starved for intriguing plays in their own country.

While the world is watching spreads on Irish sovereign debt, a group of bargain hunters are eyeing Irish bank debt. In particular, they are scouting Ireland's two largest private banks, Allied Irish Banks and Bank of Ireland Group.

They are focusing on the treatment of about $9 billion in junior bonds issued by the banks that will be among the last to get paid off in any restructuring. Those bonds plunged in April as worries about euro-zone debt gripped the markets. As prospects of a bailout—and a recapitalization of the banks—increase, hedge funds say they see opportunities in the lowest-ranked debt of Allied Irish and Bank of Ireland.

Bonds that rank low on Allied Irish's capital structure are up 20% to around 55 cents on the dollar since Friday, as anticipation of a rescue loan reaches fever pitch. Junior debt owed by Bank of Ireland, the stronger of the two, thanks to limited commercial-mortgage exposure, bottomed out around 65 cents last month and has recovered to the 70s this week.

It is what comes after a bailout that distressed investors are trying to handicap.

The junior debt doesn't benefit from the explicit government guarantee awarded to the senior debt. So the risk remains that junior bondholders may be forced to take a hit on their bonds under any restructuring, whether under Irish or European oversight.

But the recent rebound of the junior bonds reflects optimism that they will remain safe.

That outcome depends heavily on Allied Irish and Bank of Ireland retaining at least partial private ownership. Ireland currently lacks a mechanism to restructure any bank debt, but it is in the process of passing legislation to allow an exchange of junior bonds of its ward Anglo Irish Bank at 80 cents on the dollar.

That probably won't apply to Allied Irish Banks, unless its ultimate recapitalization needs far outstrip the government's revised forecast in September, said Nomura credit-desk analyst Soumya Sarkar.

The intrigue surrounding Ireland is still too opaque for most hedge-fund managers to jump in. The cost of insuring $10 million of Allied bonds was still $1.3 million on Tuesday, up from about $1 million last week, according to data provider Markit.

A safer investment would be to buy Allied Irish's senior bonds, which yield 12% to 13%. That pales in comparison to the upside in the subordinated bonds but pays significant pickup over the 9.5% yield on Bank of Ireland's bonds—not to mention the single-digit yields on U.S. junk debt.

Given the lack of visibility on that outcome, a much simpler play presents itself, according to one New York-based hedge-fund manager who toured Dublin last month—just short the euro.

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Wall Street and foreign banks making money from Irish misery