So what do I turn the heat up to?

I'm hearing a lot about why we should or shouldn't toast the bondholders or put at least a part of the bad debt cost onto them. Is this completely unexplored territory or have banks in other countries leaned on their bondholders? What was their experience? What was the long term cost/damage in terms of the resultant cost of borrowing?

I'm no expert on bonds (likewise Joe Soap) but discussion to date has gone from "I'm right. You're wrong" "No I'm right" to stuff that is way over our heads with no in-between. Any clear examples that we can look at to educate ourselves?

Good question. Over to YM, JMC and the likes. Enlighten us please.

I'm equally clueless. I keep hearing about the importance of bondholders, but when a business is in trouble one of the first to lose out are debtors who may be forced to accept in some cases pennies on the euro for their debt. I fail to see how bondholders are unlike any other debtor.

What makes them so special?

They're creditors of the bank. It'd be a bit like stinging your main supplier. 'Fine' if you don't intend to continue trading or deal with them again in the future.

Anyone know what is happening the bondholders of the small regional banks that are folding in USA at the moment?

Yeh, but this happens every day of the week. The only diff that i can see is that they are the "great and the good".

Ask any business owner that has ben through liquidation or examinership. Its not pretty but when you get sorted there is allways another supplier willing to supply. Albeit on better terms but willing to supply nontheless.

WHy not get the directore to guarantee bonds in future ala personal guarantees with ltd companies. I can tell ya, it would make them a lot more prudent with there business practices. Just a thought.

Also fine if you cease to exist as a trading entity (i.e you're insolvent) and someone with less baggage and a bit more cop-on comes in to take your place in the market.

Bondholders can be pissed with AIB, BoI, et al. They've no right to be pissed with Ireland's taxpayers because we never entered into a contract with them.

Oh there's nothing I disagree with there.

Fucking madness and what's even worse is that Pill didn't make any profits unile Bob, C&B, MB, etc

They get wiped out.

To my mind, it depends on whether we look in an Ireland context or a European context. In an Ireland context, it would be big news if there were enforced debt for equity swaps or if bondholders were given the assets they have secured their bonds on and told "thanks very much".

I'm not sure that it would be as big a problem in a european context, if we were the only country in trouble. But the fact is that we're not. And there is a risk of contagion - even a partial default on Irish bank debt would have implications for banks in similar positions in the rest of the eurozone.

But as to the idea that we would never get capital again, I think it is ridiculous. Provided the euro is there and there is a benchmark of other european bonds, Irish banks would pay higher amounts for debt. This would increase the cost of credit and also increase the attraction of deposits, so savers would get higher rates, which would encourage saving. The encouraged saving would, through the magic fractional reserve multiplier, increase the amount of credit available. Higher credit costs should also be a disincentive to poor investment, both for borrowers and for suppliers of credit.

I note that it is largely equity analysts that have commented so far on the prospects for credit in Ireland. I note also that these analysts are neither credit practitioners nor disinterested in maintaining current equity ownership levels (avoiding dilution).

I further note that before the guarantee was enacted, the imputed default rating of Irish bank bonds was high, the price was low and yields were at distressed levels. Any bondholder who sold at those levels has already taken a loss on their investment. So a partial default has already happened. Restructuring banks so that they have a lower risk of default after the end of the guarantee by, say, converting 20% of bonds to equity, would have the effect of increasing the rating of those bank bonds and so increasing the price of the existing bonds...

You want madness, Pill, take a look at IL&P - up 17% on some chunky buying.

Well I've been trying to work out how Anglo would have been wound up if it had been taken over by the FDIC. The ballpark figures for taxpayer costs for Anglo would seem to be around a billion of two and that is without defaulting on the covered bonds which are the only bonds that matter at Anglo.

The handbook is here..

http://www.fdic.gov/bank/historical/reshandbook/

but for the answer to you initial question is on page 72 of the handbook..



So the senior bondholders get payed after the depositors get payed off. And if I remember correctly from the S&L crisis 1,2,3 usually got paid in full (or close enough), 4 sometimes and 5 almost never.

The Chinese have no problem funding Argentine Bonds.

Every Tom, Dick and asshole I've spoken to over the last couple of weeks in piling into bank shares (very small players admittedly).

How depressing.

I have an uncharitable view on this. That the share prices are being ramped in advance of deeply discounted cash-calls that will only be open to institutional investors with the government underwriting - as per Lloyds and RBS...