Friday 19 January 2018

AIB now planning pre-election bond deal to repay bailout cash

Michael Noonan
Michael Noonan

Donal O'Donovan and Kevin Doyle

AIB will begin repaying part of its €21bn taxpayer bailout ahead of the general election, despite plans for a stock market flotation being delayed until next year.

The State-owned lender plans to repay as much as €2bn of its State rescue this year, raising the cash by borrowing the money on the markets.

The bank is reported to be planning to raise between €1.5bn and €2bn as early as November by issuing junior bonds known as Tier 2 and Additional Tier 1 notes, according to the Bloomberg newswire quoting unnamed sources.

The money will be used to part repay €3.5bn of preference shares, a type of loan. It will be the first major repayment by AIB of any of the €21bn cost of bailing out the bank.

Any money recouped for the Exchequer is already earmarked for use in reducing the national debt, which stood at more than €200bn at the end of last year, including rescue loans owed to the European bailout funds.

Any deal to issue new AIB bonds will be subject to European Central Bank approval, as well as agreement from the Minister for Finance.

The Department of Finance and AIB declined to comment on the plans last night.

Fianna Fáil's Michael McGrath welcomed news that the bank is set to pay off some of its taxpayer loans.

"Apart from the money injected into Anglo Irish Bank, AIB was the next most costly institution with the State pumping €20bn into its rescue.

"Taxpayers will want to see that money returned as quickly as possible. The markets are currently very favourable for Irish banks and it seems sensible of AIB to take advantage of the benign conditions to get capital and start repaying its bailout," he said.

The plan is in line with previous comments from AIB chief executive Bernard Byrne, who said on October 8 that the bank it will be "paying a very sizeable chunk of capital back to the State in the not too distant future". He made the comments in a speech at the Dublin Chamber of Commerce annual dinner, to an audience that included Taoiseach Enda Kenny.

Mr Byrne, who took over the top job at the bank this year said that, in time, taxpayers will be in a position to get back all of the bailout money.

Minister for Finance Michael Noonan has said that over time the full cost of bailing out AIB, Bank of Ireland and Permanent TSB will be recouped, though at best just a fraction of the €34bn bailouts of Anglo Irish Bank and Irish Nationwide Building Society will be recovered once their liquidation is completed.

The State has already recouped the €4.8bn cost of rescuing Bank of Ireland, and retained a valuable stake in the bank.


Permanent TSB paid back €410m of its rescue loans, and indicated the balance could be repaid by 2018.

That leaves AIB's debt to the State, and Nama, as the Exchequer's big remaining financial sector legacies of banking crisis.

As well the €3.5bn of preference shares, the State is sitting on €1.6bn of contingent capital notes (Cocos) owed by AIB as well as owning more than 99pc of shares in the bank.

Irish Independent

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