Business Irish

Friday 9 December 2016

Investors in move to delay AIB 'burden sharing' plan

Tim Healy and Donal O'Donovan

Published 03/06/2011 | 05:00

The firms, Abadi Capital and Aurelius Capital, are expected to ask the High Court today to delay plans for a punishing buyback of AIB's subordinated bonds. Photo: Getty Images
The firms, Abadi Capital and Aurelius Capital, are expected to ask the High Court today to delay plans for a punishing buyback of AIB's subordinated bonds. Photo: Getty Images

Investment firms trying to block the Government imposing losses on some AIB bondholders want the High Court to delay the planned "burden sharing".

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The firms, Abadi Capital and Aurelius Capital, are expected to ask the High Court today to delay plans for a punishing buyback of AIB's subordinated bonds.

The buyback aims to cut €2bn from the cost of the bank bailout, and is a central bank in the Government's "burden sharing" plans.

The two firms are challenging a court order secured in April that allows the Finance Minister to change the terms and conditions on AIB's subordinated bonds.

That order is being used to encourage bondholders to take up the buyback offer.

Court proceedings were due to get under way last night, but have been delayed until today while the parties to the case finalise documents.

Barrister John Rogers is acting for Abadi.

Yesterday, he told Mr Justice John Cooke that his client is concerned that a buyback offer for AIB, announced last month since the proceedings were initiated, may have overtaken the April order.

The latest buyback was announced on May 13 and will be formally closed on June 13.

Abadi wanted the June 13 deadline extended until after the court had decided the Abadi/Aurelius challenge.

Mr Justice Cooke questioned whether that could happen, but said the request to delay the buyback can be heard when the case formally gets under way.

Under the latest buyback proposals, AIB will impose losses of as much as 90pc on subordinated bondholders.

Clause

Yesterday Irish Life & Permanent launched its own burden sharing exercise. The lender is offering to "buy back" around €800m of debt at just 20pc of face value.

Some bondholders are being offered as little as 8.63pc. It has been structured to encourage bondholders to sell back the paper as soon as possible.

Bonds that will command 20pc of face value at the early deadline of June 16, holders of the same bonds that accept the buyback later will receive 17.5pc of face value.

If a majority accepts the offer, it triggers a clause that punishes any hold outs by giving then just €1 per €1,000 of bonds.

Irish Independent

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