Bank of Ireland’s hybrid debt downgraded by Standard & Poor’s
Bank of Ireland has submitted a restructuring plan to the European Commission. Photo: Bloomberg News
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Bank of Ireland’s hybrid securities were downgraded by Standard & Poor’s on concern the European Commission may demand the lender defer payments on some of the notes as a condition of receiving state aid.
S&P cut its rating on all the bank’s hybrid notes by three steps to CCC, eight levels below investment-grade status, the ratings firm said in a statement today.
Bank of Ireland received €3.5bn from the Government to shore up its capital against losses on property loans. It submitted a restructuring plan to the European Commission, which must approve the state aid, in November.
Allied Irish Banks, which also got state support, said yesterday it would defer payments on some securities after a request from the European Commission.
“The EC has, in our view, developed a track record of requesting that stressed banks in receipt of state aid and subject to restructuring plans should not make coupon payments on their hybrid capital instruments unless under a binding legal obligation to do so,” S&P said in the statement.
“The terms of most of BoI’s hybrid capital instruments appear to contain optional deferral clauses.”
Hybrid securities have elements of debt and equities. Banks issue the notes to raise capital required by regulators as a cushion against losses to depositors and creditors.
- Ian Guider
© Bloomberg
