Business Irish

Friday 24 March 2017

High Court fast-tracks challenge to AIB's debt buyback plan

Tim Healy

THE High Court has agreed to fast-track a legal challenge by two New York-based investment firms to the Government's plan to buy back debt from bondholders in AlB at a significant discount.

The court has fixed June 2 for the hearing of the case which has implications for the Government's proposals to recapitalise the Irish banks.

The firms are challenging a subordinated liability order (SLO) obtained by Finance Minister Michael Noonan from the court last month in what barrister John Gordon, for Aurelius Capital Management, described as an effort to "beat" the subordinated bondholders into divesting themselves of their bonds in AIB at a "steep" discount.

Aurelius and the second firm, Abadi & Co, initiated their proceedings on April 20, days after Mr Noonan secured the SLO in an effort to achieve some burden sharing by bondholders in AIB's recapitalisation. The SLO allows him to change terms, conditions and maturity dates on certain bonds.

The cases were before the President of the High Court, Mr Justice Nicholas Kearns, yesterday for case management purposes.

Disputed

Brian Murray, for Mr Noonan, said the matter was "critically urgent" as the disputed order was critical to the recapitalisation of AIB which the State had agreed with the EU and IMF to have completed by July 31.

Urging the judge to fast-track the cases at a speedier pace than that proposed by the applicant firms, Mr Murray suggested a timescale which would involve the full case, plus any appeal to the Supreme Court, being heard and determined by July 31.

Mr Gordon, for Aurelius, and Jim O'Callaghan, for Abadi, both accepted the matter was urgent but argued the time-scale proposed by Mr Noonan would impose inordinate pressure on them. They also argued the time pressures were created by the decision of Mr Noonan to apply at the "last possible minute" for the disputed SLO.

Mr Justice Kearns said the sides had not addressed the matter of judicial resources required and the High Court would need time to consider the issues and did not have the massive resources available to the sides.

There might also be an appeal and, in the circumstances, he would grant Mr Noonan's application for a trial date of June 2.

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