AIB to Repay First $1.9 Billion of Irish Aid After ECB Nod

  • AIB plan will be partly funded by subordinated bonds
  • First payment to be made in coming months: Finance Ministry

Allied Irish Banks Plc said it’s on track to repay an initial 1.7 billion euros ($1.9 billion) of its government bailout after receiving approval from the European Central Bank’s supervisory arm.

The bank will redeem part of the state’s 3.5 billion euros of preferred stock, with the rest converted to equity, AIB said in a statement on Friday. The payment will be partly funded by AIB issuing subordinated bonds for the first time since the financial crisis led to its 20.8 billion-euro bailout. The lender plans to sell at least 750 million euros of Tier 2 bonds and 500 million euros of Additional Tier 1 notes.

“This is a key step on the path to the government realizing its investment in AIB in full and is a real success story ahead of an upcoming national election early next year,” said John Cronin, an analyst with Investec Plc in Dublin. It’s a “significant milestone for AIB in advance of a much-awaited share sale transaction in 2016.”

The repayment will be the lender’s first step toward its goal of returning the entire amount to the government. The initial amount will be delivered “in the coming months,” the Finance Ministry said in a separate statement. Junior bondholders in the bank suffered 5 billion euros of losses between 2009 and 2011 as the bank’s bad loans surged following a real-estate collapse.

Full Value

“With AIB back to profitability and recording strong growth in lending to Irish businesses and consumers, I am confident that the bank can play a vital role in facilitating the continued growth in the Irish economy,” Irish Finance Minister Michael Noonan said in the ministry’s statement. “The changes announced today also lay the groundwork for the Irish taxpayer to ultimately recover the full value of their 20.8 billion-euro investment in AIB.”

The state will recover an additional 1.6 billion euros from AIB in July as its 2011 investment in contingent convertible notes matures. Noonan said the timing of a share sale in the 99.8 percent state-owned bank will be a decision for the next government, following national elections due in the first quarter of next year.

The state could raise more than 3 billion euros next year through the sale of a 25 percent stake in the bank, said Fiona Hayes, an analyst at Cantor Fitzgerald LP.

AIB is the last of Ireland’s three surviving bailed-out banks to start repaying the taxpayer.

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