Moody's downgrade for AIB junior bonds
Published 18/05/2011 | 05:00
RATING agency Moody's last night downgraded AIB's subordinated bonds by one notch from Ca to C.
The cut comes after AIB announced a plan to buy back its subordinated and tier 1 debt for cash at a very steep discount.
The rating for deposits and more senior bank debt has not been affected.
Moody's said it had classed the buy-back offer as a "distressed exchange" because the discount was so large -- at up to 90pc and because it considered the offer coercive.
That's because under the terms if 75pc of bondholders agree to the offer, any dissenting bondholder will be forced to accept just 1 cent per euro for their bonds.
Moody's said such distressed exchanges were a form of default, even though the bank would not actually file for bankruptcy or miss an interest or principal payment.