Fir Tree Capital Opportunity Master Fund LP v. Anglo Irish Bank Corp.

NAMA Wine Lake reports on this case.

16 replies on “Fir Tree Capital Opportunity Master Fund LP v. Anglo Irish Bank Corp.”

I’m not saying the author of NAMA winelake is an unstable nutcase, but it seems like he’s actually, literally comparing a poor return on investment for holders of certain financial instruments to the barbaric genocidal slaughter of hundreds of thousands of people. Is this the sort of thing that you endorse, Philip? Do you think that that sort of insane ranting is constructive and sheds light on the state of the Irish economy?

Do you understand the meaning of the term metaphor? If not, go look it up in the dictionary and compare it to the definition of simile.

There is a potential case for fraudulent conveyance here. I don’t know if there is a law in Ireland against it but there certainly is in the US. The depositors of Indymac were wiped out (above the FDIC limit) when it failed in the summer of 2008. It is quite possible though that the December bill covers DoF’s ass and it is not clear to me if a US court has jurisdiction in this case.

This is a very interesting case. Presumably the “sale” of the Anglo deposits (liabilities) is to be backed by the transfer of corresponding assets, including NAMA bonds. The bondholders’ complaint seems to be that their interests will then be backed with the remaining inferior assets. This is said to constitute a brazen breach of various covenants of the notes. Interestingly, there does not appear to be any mention in the pleadings to Brian Lenihan’s pari passu argument, i.e. that deposit holders cannot be treated more favourably than bond holders. One reason for this may be that the notes are governed by NY law, not by Irish or European law. Another, perhaps more important, reason may be that these notes are for subordinated bonds, i.e. they were issued on the express understanding that they would rank behind other creditors.

It occurs to me that the first hurdle for the State/Anglo to overcome is to explain how a piece of Irish legislation can unilaterally alter the terms and conditions of notes subject to NY law.

Soros does a bit of pro-bono at times – he even rails at the Irish being ‘crippled’ – but this was a few weeks ago – today we are not only ‘crippled’ but maimed, blind and destitute as well.

Make the call!


keep up the work – Blind Biddy has a few spare candles she can let u have gratis – no barter needed for you.


Is there any other part of the pleadings other than the below statement within the pleadings on page two of the document that has made you believe they are subordinated creditors:

“The Minister also may obtain ex parte “subordinated liabilities orders” that purport to eliminate any and all rights of subordinated creditors such as the Note-holders.”

If they are subordinated note holders, would they not have already been subject to the voluntary buyback 80% haircut offered last year? They knew ‘resolution and reorganisation legislation (as it was referred to then) was coming down the line to squash those who did not accept the offer.

If they were part of the buyback offer, why do you think they waited until the Direction Order by the Minister concerning Anglo and INBS merger and deposit auction to issue a pleadings rather than after the enactment of the Credit Institutions Stabilisation Bill in December?

What was so significant about the direction order as opposed to the enactment of the actual Bill which can empower the current or next Minister to wipe out their investments entirely? It would seem a risky strategy on their behalf that they didn’t feel a squeeze down against those who didn’t accept the buyback was going to occur before the bank was wound down?

If it is the case that the Minister feared and Firhouse received similar advice, that it would legally be more difficult to enact a subordinated liabilities order before the winding down of the bank, what does that say about the actual power of the statute for the 55% of AIB note-holders who recently refused the 70% haircut buyback?

Or am I missing something? I’m certainly no expert.

If the deposits are sold, then the sale value goes to equity, leaving a “fair” value for bond holders to pick over. That would be my argument in court.

The alternative is to talk a lot about th deposit insurance scheme, enact legislation to increase contributions from all ” solvent” banks including Anglo and INBS on an up front basis. Then allow existing depositors to open new accounts to spread deposits across names and accounts so that the maximum deposit amount falls under the umbrella. Then let it go

The point is, the idea that depositors and bondholders rank equally to bondholders in the capital structure was always a ridiculous fiction. It served only as a smokescreen for politicians living under a grandiose delusion that they could fool people to accept their silly guarantee.

Are we seriously saying that the Government is devising a plan to burn bondholders? Please someone tell me this is true!

@ John Kennedy

I agree that it is not entirely clear from the pleadings whether the debt is senior or junior debt. The passage from the pleadings referenced in your post does suggest that the plaintiffs are subordinated bond holders.

I accept your point that if the plaintiffs do hold subordinated bonds, then they should have been affected by the payback deal late last year. I am not sure whether this affected all subordinated debt?

My best guess at an answer to your question as to why the proceedings have only been issued now is that the bondholders were waiting for some “event” which they could argue constituted a default. They seem to be relying on the intended merger with INBS as constituting a breach of the covenant against transfer of the entirety/substantial entirety.

Is Anglo is breach of its contractual obligations if the transfer is not if its volition and is beyond its reasonable control? Or is Anglo saved by force majeure provisions?

Can the plaintiff Hedge Fund get an injunction under Irish Law to stop the transfer?

If not, are they limited to an action for damages?

If they are limited to an action for damages then how are those damages calculated, i.e. is it by reference to what their bonds would have been worth if the breach of contract had not occured, or does the breach trigger a clause in the contract or other mechanism which will convert them into senior unsecured debtors?

How does the plaintiff hedge fund enforce any award of damages? Must they seek to wind up the company?

@ zhou

Interesting questions. Not sure that it is possible to answer most of them without having sight of the full terms and conditions of the “notes”. It may well be, for example, that there is a force majeure clause.

It appears from a quick read of the pleadings that there are subsidiaries/assets in the US which can be enforced against in the event that the bondholders are successful. It appears as if they are seeking some sort of interim restraining order preventing the US subsidiary from reducing its assets below the sum of 200 mi, i.e. the amount claimed by the bondholders.


My point is that even if the hedge fund win the case how much better off will they be.

There is a clause in found in many contracts that the party providing services will maintain professional indemnity insurance.

However, the effect of a breach of that clause in terms of an award of damages is nil. The reason is that the claimant can only claim against PI Insurance if it has a negligence claim for €x against the other party. If the other party turns out to have no insurance then its loss is still only the €x it already has the judgment for, therefore no additional judgment is necessary.

This may or may not be analagous to the hedge fund case against anglo. The hedge fund may be abe to force anglo into liquidation/resolution or it may be able to inhibit Anglo in dealing with its US assets or it may be able to get promoted to being a senior unsecured debt repayable on demand. One needs to know what is at stake to know whether we should be concerned or not.

Of course, one cannot know what is at stake without sight of the debt instrument (contract) and the pleadings.

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