Business Irish

Tuesday 23 July 2019

State owns 99.8pc of AIB as banks revamped


Laura Noonan and Donal O'Donovan

THE State's stake in AIB is set to rise to 99.8pc by the end of the month, it emerged last night, as the financial markets absorbed an unprecedented number of announcements about Ireland's radical bank restructuring.

The revelations about AIB's shareholding were revealed in a document describing the Government's plans to spend €5bn on new shares at 1c a piece and pony up any extra money through a "capital contribution".

The extra money will be the difference between AIB's €14.8bn capital demand, less a €1.6bn government loan and whatever money AIB is able to make from doing deals with bondholders.

The capital contribution won't dilute down existing shareholders, who would have seen their collective stake fall to less than 0.01pc if the Government had put in all the cash via new sales.

AIB also completed its merger with EBS yesterday, and revealed that the building society's chief executive Fergus Murphy will be joining the bank's newly revamped executive team while four senior AIB directors will join EBS's board.

AIB and EBS will remain as separate brands and businesses, but some EBS departments will have reporting lines into AIB, a statement confirmed. Customers will be unaffected by the merger.

Yesterday also saw AIB get the green-light to proceed with attempts to buy back debt from bondholders after a legal challenge by an investor was settled.

Aurelius Capital had blocked two of AIB's 18 debt buybacks last month, but yesterday agreed to abandon its protest after reaching an undisclosed settlement with the Department of Finance.

A source at AIB said it now expects to move ahead with an offer to buy back the bonds at a steep discount using a so-called subordinated liabilities order (SLO) sanctioned by the High Court.

The SLO gives the government sweeping powers to change the terms of AIB's subordinated bonds, making buyback offers at any price difficult to resist.

Yesterday's also saw Anglo Irish Bank and Irish Nationwide officially merged into a new entity dubbed IBRC, or Irish Bank Resolution Corporation, so the duo's assets can be wound down over the next decade.

Meanwhile, Irish Life & Permanent yesterday announced that most of its junior bondholders have taken up an offer to sell back their debt at a discount. The buyback of one €54m bond was not approved and remains outstanding.

Irish Independent

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