MONEY FOR NOTHING:YESTERDAY $1 billion was transferred from Irish Bank Resolution Corporation (IBRC) - formerly Anglo Irish Bank and Irish Nationwide Building Society - to senior bondholders whose debts were not guaranteed by the Government.
The payment, about €720 million, was made through a clearing house which distributed the cash to the bondholders.
The payment through a third party means that the bank doesn't know the identity of these lenders.
The bond was issued by Anglo five years ago when it was borrowing on the international money markets to fund heavy lending under the stewardship of Sean FitzPatrick and David Drumm.
Given that Anglo's credit rating was downgraded to junk status in November 2010, many of the original investors in the bond sold the debt on in the markets long ago.
Once a company is downgraded to junk, certain companies have to sell under their investment rules.
Many investors who received yesterday's payout made big profits as they bought when the bond traded at 55-75 cent in the euro and have received 100 cent in the euro.
The bond traded well below its face value early this year because investors were concerned about full repayment of the debt given the pre-election uncertainty that Fine Gael and Labour might "burn" senior bondholders once in power.
One financial source said that he had two friends who had bought into the Anglo bond. "The first is a distressed debt fund manager who bought last year . . . he bought in at around 70," said the source. "My other friend is a New York-based fund manager who bought in over the summer at around 75 or so."
Yesterday's bond was repaid from a pool of funding at IBRC.
This pool changes every day and comprises cash from loans repaid by customers, initial proceeds from the sale of Anglo's $9.2 billion loan book and emergency loans from the Central Bank - the life support propping up IBRC.
The State is pumping €29.3 billion into Anglo and €5.4 billion into Irish Nationwide over time.
Anglo raised €3.3 billion by not fully repaying junior bondholders - who are paid more in interest for providing higher-risk debt - but the European Central Bank has blocked moves to inflict losses on more secure senior bondholders.
Cross-default clauses in senior unguaranteed bonds meant that a failure to have repaid yesterday's bond could have triggered demands for the immediate repayment of senior guaranteed bonds.
The Taoiseach said yesterday that the Government was "not going to scuttle this ship" by overruling the wishes of the ECB.
He will face further calls not to repay senior unguaranteed bondholders when IBRC has to repay €1.25 billion in January, and two more bonds in June - a £400 million bond and a €600 million bond issued by Michael Fingleton's Irish Nationwide.
