Business Irish

Tuesday 12 December 2017

€6.6bn AIB rights issue reviewed in new strategy

Higher capital targets lead to delay in coming to the market

Laura Noonan

ALL aspects of AIB's planned €6.6bn rights issue are being reviewed, including the 50c a share pricing, the Irish Independent has learned.

As recently as November 1, AIB told shareholders it would be coming to the market "later this month" with a view to raising €6.6bn "before the end of the year".

The rights issue was to be launched at 50c a share, and would have been fully underwritten by the State if it failed to attract private investment.

Sources last night confirmed that the equity raising had not yet been launched and may not be launched this side of Christmas.

"Everything is being reviewed at the moment in light of the bank's higher capital targets," said one source. "There's no agreement to go ahead with anything."

On November 28, the Central Bank upped AIB's capital target to €9.7bn after the regulatory minimums for all Irish banks were raised.

AIB had been working to a December deadline to raise the initial €6.6bn -- the bank now has until February to raise the full €9.7bn with no incremental deadlines along the way.

Sources stress that AIB does not yet know how much of the €9.7bn will be raised by a rights issue, since the bank is exploring various other avenues.

These include negotiating haircuts on its €4.9bn of subordinated debt and selling off batches of loans and non-core assets.

"It's too early to say how it will work out," one source said.

The market is now expecting AIB to mount a single rights issue over the coming months, once the bank has formulated an overall capital strategy.

It is understood that the 50c price is no longer "a definite".

When the price was set on September 30, it was at a 10pc discount to AIB's opening price of 55c, making the offer potentially attractive to shareholders.

AIB's stock closed at just under 38c last night, prompting speculation that the price of the rights issue will have to be reduced to whet private investment.

The Government has insisted that AIB will remain listed on the stock exchange even if it becomes more than 99pc state-owned.

Meanwhile, international media yesterday reported that Irish banks will have to accelerate plans to dispose of assets to satisfy the European Central Bank (ECB).

It is believed to want the banks to offload €10bn of assets over the next 12 months as the banking system is "right-sized".

A spokesman for the Central Bank of Ireland last night said "no firm targets" had been set on the disposals process.

Deadline

Banks have been given until April to present a disposals plan to the Central Bank.

Bank of Ireland (BoI) has already had a plan approved by the EU Commission (EC) and is believed to be proceeding with that unless instructed otherwise.

The plan sees BoI sell off life insurance arm New Ireland, mortgage lender ICS and a handful of smaller assets by the end of 2014.

Crucially, the EC has not asked BoI to sell off its UK retail operations, though its substantial UK mortgage book is being wound down.

AIB is considering asset disposals as part of a review being carried out by executive chairman David Hodgkinson. It is expected to make a renewed bid to sell its UK business.

AIB may now make the UK businesses more attractive by tapping a €2bn "credit enhancement" fund to insulate buyers from future losses.

Irish Independent

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