Lawsuit could halt Anglo Irish U.S. loan sale

NEW YORK (Reuters) - Anglo Irish Bank Corp PLC <ANGIB.UL> has until the end of Wednesday to tell a U.S. judge why it should not have to pay off $200 million of bonds before it sells $10.3 billion worth of loans on U.S. commercial property.

District Court Judge Paul Gardephe on Tuesday ordered the failed bank to explain if it planned to merge with Irish National Building Society and sell its U.S. portfolio of loans, court documents showed.

Sources familiar with the matter have said that the bank has engaged real estate investment banking company, Eastdil Secured, to sell the portfolio.

A representative for Fir Tree declined to comment. Attorneys for Anglo Irish could not be reached for comment.

In February, funds run by U.S. hedge fund Fir Tree Partners filed a lawsuit in federal court to prevent Anglo Irish from merging with a suitor or selling off assets before it repaid the $200 million in notes.

Anglo Irish, which was taken over by Ireland's government, has argued that it is a sovereign nation and cannot be sued. Fir Tree has said that the bank sold those notes under New York commercial law and was therefore operating as a commercial entity and so it must adhere to the notes' covenants.

If the judge agrees with Fir Tree, he can then decide whether to grant an injunction. An injunction could prevent the loan sale until the $200 million was paid, or require the new owner or owners to assume the payment.

Since then, the Irish government, which has taken over many of its failed banks and lenders, has said it planned to merge Anglo Irish and the Irish National Building Society.

(Reporting by Ilaina Jonas)