Allied Irish to Buy Back Subordinated Debt as Noonan Signals Forced Losses
Allied Irish Banks to Offer to Buy Back Subordinated Debt
Aidan Crawley/Bloomberg
The Allied Irish Bank Plc company logo sits outside the bank's headquarters in Dublin.
The Allied Irish Bank Plc company logo sits outside the bank's headquarters in Dublin. Photographer: Aidan Crawley/Bloomberg
Ireland’s Finance Minister Michael Noonan
Aidan Crawley/Bloomberg
Ireland’s Finance Minister Michael Noonan.
Ireland’s Finance Minister Michael Noonan. Photographer: Aidan Crawley/Bloomberg
Ireland’s Finance Minister Michael Noonan said Allied Irish Bank Plc will seek to buy back subordinated debt in coming weeks and threatened to impose losses on holders that refuse the offer.
The government will “take whatever other action is necessary to ensure appropriate burden-sharing” with the lender’s remaining junior bondholders, Noonan said in a statement today. He didn’t give any terms of the buyback.
“They’re clearly trying to spook the market with a view to push bond prices lower so that they can get a decent take-up for any voluntary offer,” said Jim Ryan, director at Dublin-based Glas Securities. “The statement is suitably vague.”
Ireland has injected 7.2 billion euros ($10.4 billion) into the country’s second-largest lender over the past two years to shore up its balance sheet against mounting bad loan losses. The bank, which posted a record 10.4 billion-euro net loss for last year, was ordered by the central bank to raise an additional 13.3 billion euros after last month’s stress tests on the country’s lenders.
Allied Irish has 2.6 billion euros of subordinated debt, the central bank said March 2. The lender’s 218 million euros of 10.75 percent subordinated bonds due 2017 fell 2.75 cents on the euro to 27.5 cents, according to Bloomberg Bond Trader. The company’s 650 million euros of 12.5 percent bonds maturing in 2019 gained 1.5 cents to 28.125 cents, the prices show.
January Fundraising
Bank of Ireland’s 747 million euros of 10 percent bonds maturing in 2020 fell 2.75 cents to 63.5 cents on the euro, while its 272 million pounds ($445 million) of variable rate notes due 2020 slipped 1.33 pence to 59.7 pence.
Allied Irish has generated 2.97 billion euros of additional capital from subordinated bond exchanges and buybacks over the past two years, according to data compiled by Bloomberg. That figure includes the 1.4 billion euros it generated in January when it bought back 2 billion euros of subordinated bonds for 70 percent less than face value.
Work is also underway to ensure “appropriate burden sharing” for subordinated bondholders of Bank of Ireland Plc and Irish Life & Permanent Plc, with “a further statement on this in the coming weeks,” Noonan said.
He reiterated that the government doesn’t plan to enforce losses on senior bondholders of Allied Irish, Bank of Ireland, EBS Building Society and Irish Life, the country’s so-called viable lenders.
To contact the reporter on this story: Joe Brennan in Dublin at jbrennan29@bloomberg.net
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net
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