Aurelius may appeal ruling on bonds

THE NEW YORK investment firm suing the State over plans to inflict losses on AIB subordinated bondholders has said it may appeal a court ruling yesterday that limits the effect of its legal action.

Mr Justice John Cooke ruled in the action being taken by companies of Aurelius Capital Management that a court order granted to the Minister for Finance in April is effective over all but two of 18 AIB subordinated bonds.

The court found the case taken by Aurelius related to only two of the bank’s bonds and so granted the Subordinated Liabilities Order over the other 16.

Minister for Finance Michael Noonan said the court ruling clarified the position for investors in the 16 bonds in advance of the June 13th deadline for take-up in AIB’s debt buyback.

The order allows the bank to make interest payments on the bonds optional and extend maturities of some bonds until 2035, reducing their value so as to encourage bondholders to accept the terms of the debt buyback.

Following the court ruling yesterday, AIB said it was making interest payments discretionary and extending the maturity on nine of the subordinated bonds.

The bank said that requirement to pay interest arrears on three further bonds was removed, while changes were made to another four AIB subordinated bonds.

A further €1.3 billion of sterling and euro subordinated bonds have not yet been amended, the bank said, as these two bonds are the subject of the action by Aurelius.

Aurelius Capital Master, which along with some linked firms, is challenging the April 14th order, had argued that its challenge prevented the coming into effect of the entire order on all 18 bonds.

Mr Justice John Cooke rejected arguments advanced by Aurelius as to the scope of its action and upheld arguments by lawyers for the Minister that the challenge was limited to the parts of the order relating to Aurelius.

Later, John Gordon SC, for Aurelius, said he would have to take instructions as to whether his clients wished to appeal the ruling to the Supreme Court.

Mr Justice Cooke said that any such appeal would not delay the case resuming in the new law term.

Yesterday was the last day of the current law term and the case will resume on June 22nd, the first day of the new term.

Yesterday was the third day of the hearing of the Aurelius case.

Mr Gordon continued submissions for Aurelius and was again strongly critical of the manner in which the State has discovered documents in the case.

Mr Gordon argued, when the court made the April order, that it was not provided with full information on a debt buyback to be carried out by AIB once the order was made.