Wednesday 28 September 2016

Junior bondholders pile into new AIB deal

Published 20/11/2015 | 02:30

AIB Headquarters in Dublin
AIB Headquarters in Dublin

Investors offered to lend €4.6bn to AIB in relatively risky new debt yesterday, in the lender's first issue of so-called subordinated bonds since it burned junior bondholders back in 2011.

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The State-owned bank opted to raise "just" €750m on the markets at an auction of the bonds, which were placed with investors carrying a coupon or annual interest payment fixed at 4.125pc.

The 10-year so-called Tier 2 notes, which could be wiped out if the bank gets into trouble in future, count towards the bank's capital.

The money raised will help to fund a €1.7bn repayment to taxpayers, the first major recovery from the bank of its €21bn bailout.

Back in 2011 holders of AIB's junior, or less secured, bonds were hit with losses of 90pc when the Government allowed losses sustained by the bank to be shared with its lenders as part of an effort to shave €5bn of the cost of saving the banks.

Shares in bailed-out AIB halted a three-day slide yesterday, to close at 4 cents each, a level which is seen by experts and the Government as inflated.

Irish Independent

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