Tuesday 23 January 2018

Standard & Poor's downgrades Bank of Ireland's subordinated bonds

Donal O'Donovan

Donal O'Donovan

RATINGS agency Standard & Poor's cut the rating for Bank of Ireland's subordinated bonds to from BB- to D yesterday.

It means the agency believes the bonds are effectively in default after the bank offered to buy them back at around half their face value.

However, it does not mean that the bank itself is in default, so there are no implications for BoI's solvency.

The downgrade makes it easier for holders of the debt affected to claim default insurance payouts.

Rival agency Moody's said it may also decide that BoI's subordinated bonds are in default if it considers the plan to swap old debt for smaller amounts of new debt is a "distressed debt exchange".

Meanwhile, Fitch cut the credit ratings across the Irish sector last night. It had already slashed the Government's rating during the week.

Fitch downgraded AIB and Bank of Ireland's ratings from A- to BBB -- just above 'junk status'. If there are any further cuts, bond investors will be forced to sell senior bonds issued by the banks.

The agency placed EBS on ratings watch negative for a further downgrade, saying it was unlikely that EBS would be acquired by a higher-rated entity. It also downgraded the subordinated bonds issued by AIB, based on the likelihood that burden sharing will be applied to these securities, just as it already has been at Anglo Irish Bank.

The government-guaranteed debt issued by all of the Irish banks was similarly downgraded. Fitch said it would be years before Ireland returned to an A rating.

Irish Independent

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