My earlier post on Standard and Poor’s neglected to mention their comments on Anglo Irish Bank. The key passage is as follows:
Anglo has submitted a restructuring plan to the EC as a consequence of the state aid it has received from the Irish government. It has been reported that the management is proposing that Anglo is split up into a good bank and a bad bank. We anticipate that, if such a plan is approved by the EC, capital instruments such as lower Tier 2 may be left in the bad bank. Other options reportedly considered in the plan are liquidation and an orderly wind-down. Anglo’s plan is yet to be approved by the EC; we understand approval may occur in the first half of 2010.
I’d guess that these lower Tier 2 instruments (i.e. subordinated bonds) left in the Anglo “bad bank” (not to be confused with NAMA …) would end up being pretty worthless.