AIB MAY have to force some creditors into accepting shares in the bank as repayment for their debts in order to meet new capital requirements, one analyst warned yesterday.
The bank confirmed this week that it made €1.4 billion from the buyback of subordinated debt from some creditors, but it has a further €4.7 billion to raise to meet capital requirements.
The bank will also have to do a deal with the holders of €775 million of undated junior debt, that Stephen Lyons, analyst with stockbrokers, Davy, said yesterday could only be exchanged for equity.
He argued that, given how unattractive the largely State-owned bank’s shares are, it is likely to have to take “coercive” action to force creditors to take up its stock.
This involves imposing harsh penalties on the creditors who do not take up whatever offer the bank makes, thus giving them little real choice.
Both EU rules and the Credit Institutions (Stabilisation) Act allow the bank to take such steps against subordinated debt holders.
Market analysts reacted positively to the fact that AIB’s buyback of €2 billion worth of subordinated debt, for 30 cent in the euro last week, did not involve coercive action.
However, that offer was open to the holders of €3.9 billion worth of bonds and the ultimate take-up, €2 billion, was lower than the troubled institution expected.
The State owns almost 93 per cent of AIB.
The bank was this week taken off the main listing on the Irish Stock Exchange and moved to the secondary, enterprise market, where it joined a range of mainly small cap or developing oil and gas exploration companies.
