Wednesday 21 February 2018

Bank edges closer to capital target with €2bn risky debt exchange

Laura Noonan

Laura Noonan

AIB has moved €1.4bn closer to its imminent capital targets after convincing investors with €2bn worth of risky debt to cash out for a payment of €600m.

However,the significant capital boost represents just half what the embattled bank would have got if investors holding all €3.9bn of eligible debt had taken up the offer.

In a statement last night, AIB noted the result of the offer, but the bank declined to comment on whether the 51pc uptake had been in line with expectations.

Some analysts had expecting a higher level of buy-in, since the latest banking legislation empowers AIB to force losses on investors at a later date.

Investors were also expected to be tempted by the fact that AIB's offer was for "hard cash", whereas previous offers by other banks have been for 'safer' debt instruments.

Others pointed out, however, that AIB's result is ahead of the 45pc response Bank of Ireland got when it recently exchanged a batch of risky debt for safe debt.

The €1.4bn counts towards the €6.1bn AIB must raise by the end February, reducing the amount of cash the state must plough in.

The exchange is also believed to have reduced the bank's annual interest bill by about €200m since it will no longer be making coupon payments on the redeemed bonds.

Irish Independent

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