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MarketScreener Homepage  >  Equities  >  Irish Stock Exchange  >  Anglo Irish Bank    ANGL   IE00B06H8J93


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Anglo Irish Bank : Anglo Irish Liquidators Face Tough Questions From Creditors

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10/07/2013 | 05:15pm EDT

Officials in charge of wrapping up the affairs of what was once one of Ireland's largest banks deny they engaged in "destruction of critical records" in liquidation proceedings in their home country.

KPMG's Kieran Wallace and Eamonn Richardson said in a court filing that the records and assets of the former Anglo Irish Bank Corp. have been properly handled in an Irish liquidation proceeding, which they are managing as "special liquidators."

Calling them "utterly unsupported," the special liquidators rebutted suspicions raised by a group that includes Castleway Properties LLC and Irish property developer John Flynn, who say a law passed in February by Ireland's Parliament stripped creditors of the bank of their legal rights and question whether Anglo Irish deserves the court protection it is enjoying.

The fracas is the latest element in a long-running grudge match between U.S. investors and others who did business with Anglo Irish and who say they are paying an unfair price for the 2009 nationalization of the bank by the Irish government, which was swept under in the global economic slowdown.

Besides the so-called "Flynn parties," who are attacking a provisional grant of protection to Anglo Irish's U.S. assets, the failed bank is facing a probe from institutional investors including affiliates of Elliott Management Corp., who are pondering the possibility of mounting an attack on the U.S. court order that is shielding money and assets in the U.S. from creditors.

Judge Christopher Sontchi of the U.S. Bankruptcy Court in Wilmington, Del., granted provisional protection to Anglo Irish not long after it filed for Chapter 15 bankruptcy protection earlier this year. He has scheduled a hearing for Tuesday on the questions raised by Anglo Irish's unhappy creditors.

The Elliott affiliates and their allies have petitioned the U.S. Bankruptcy Court to order Anglo Irish's liquidators to open their books so they can investigate the value of the assets that are being shielded.

"The Irish Process is being run by and for the benefit of the Irish State pursuant to a sui generis statute that deprives creditors of any meaningful judicial oversight, due process, or factual transparency," Elliott's attorneys complained in court papers. "If the special liquidators prevail, anyone injured by the Irish process--including the noteholders, which are Delaware LLC's who hold notes governed by New York law and enforceable in New York courts--may be foreclosed from ever seeking legal recourse in the United States courts to vindicate their rights."

The Irish liquidators deny impropriety and say the only thing Judge Sontchi needs to decide is whether Ireland is the main center of Anglo Irish's operations and the right place for it to tie up its financial affairs.

The Elliott affiliates say they "have been utterly foreclosed from obtaining even the most basic information about the Irish Process through the limited--and illusory--means available to them under Irish law."

The bank ran into trouble when the Irish property market collapsed in 2008 and 2009. In July 2011, it was combined with another troubled bank to create Irish Bank Resolution Corp. (IRIBF), the vehicle that the special liquidators are overseeing. In February, the Irish Parliament passed the Bank Resolution Act, which applies only to IBRC and which was designed to end the Irish government's exposure to IBRC and allow the government to once again access international debt markets.

The dust-up in bankruptcy court isn't the first time Anglo Irish's government-owned status has generated investor litigation.

Earlier this year, two hedge funds run by Fir Tree Partners attempted to persuade a federal appeals court in New York to dump a decision that said Anglo Irish is protected by sovereign immunity from their suit. They later dropped the appeal.

Fir Tree's complaint, and the gripes being aired in Anglo Irish's U.S. bankruptcy case, fuel warnings from advisers who say investors need to think twice, and charge extra, before risking their money in troubled foreign economies.

"Investors should be cognizant of the potential adverse liquidity of foreign bank paper and be wary of participating in new US issuances by any foreign issuer potentially subject to nationalization unless substantial protections are offered," according to an analysis last year from Bracewell & Giuliani LLP's Evan Flaschen and Katherine Lindsay.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

-Patrick Fitzgerald contributed to this article.

Write to Peg Brickley at peg.brickley@wsj.com

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