AIB shares slip as S&P slashes lender's credit rating
Published 09/10/2010 | 05:00
Standard & Poor's (S&P) yesterday cut AIB's credit rating from A- to BBB+ with a negative outlook.
The new score is S&P's lowest investment grade rating. Subordinated debt issued by AIB was cut to 'junk' status. AIB shares closed down 1.2c each at 39.50c after the announcement.
Shares have fallen more than a quarter, from 55.2c on September 29, since the Government announced its planned nationalisation last week.
The rating agency revised the ratings in response to news that AIB needs to raise an extra €3bn in equity to meet a new €10.4bn capital requirement. S&P said it believed AIB was unlikely to return to 'A' category as a stand-alone credit for a number of years.
The agency cut AIB's subordinated bonds to 'junk' status, which means some funds will be unable to invest in the paper.
But it kept the bank's short-term counterparty credit rating at the higher A-2 -- which means it sees doing business with the bank as low risk. The rating agency said AIB's current rating benefited significantly from state support.
S&P cut AIB's corporate rating to reflect the latest figure for the bank's capital requirement and after the Government imposed management changes.
The agency cut the rating for AIB's subordinated Lower Tier 2 debt to BB in response to the Government's "strong willingness" to allow losses at the same level of debt in other Irish banks. It said imposing losses on Anglo Irish and Irish Nationwide's subordinated bondholders had implications for all bank debt at the same level.
The rating cuts followed downgrades by Moody's this week and Fitch last week. AIB's state guaranteed debt was not affected by the downgrades.
S&P said its negative outlook for AIB reflected the downside risk to the recovery in AIB's earnings, an expectation AIB would be forced to rely on the Government and the European Central Bank for funding and liquidity into the future, and uncertainty over AIB's disposal programme.