AIB HAS secured a court ruling aimed at guarding against legal challenges in other EU states to the bank’s decision to not make a £21 million (€23.5 million) coupon payment to junior bondholders.
The payment was due last Saturday, but Mr Justice John Cooke granted an application by the bank on Friday, supported by the State, permitting the funds to be lodged in court pending the outcome of a challenge by a Cayman Islands investment firm to an order secured by the Minister for Finance last April.
That subordinated liabilities order, if upheld by the court, would permit AIB to not pay the coupon at all.
The order allows the Minister to change terms, conditions and maturity dates on AIB’s subordinated bonds, lift restrictions on buybacks, and reduce the value of the bonds so as to encourage bondholders to take up a debt buyback offer that had a take-up deadline of June 13th. Under the buyback, AIB will impose losses of as much as 90 per cent.
In proceedings against the Minister, which opened earlier this month before Mr Justice Cooke, Aurelius Capital Master, with some linked firms, challenged the order. Last week AIB applied to suspend the June 25th payment pending the outcome of the Aurelius case. If the Aurelius challenge fails, the bank could avoid making the payments, the court heard.
Bondholders represented by Aurelius stood to gain about half of the €21 million, and the firm strongly resisted AIB’s application. Mr Justice Cooke granted the application and has made an order for the coupon money to be paid into court pending the outcome.
AIB also asked the judge to rule his order was effective for the purposes of the EU Credit Institutions Winding Up Directive, meaning AIB’s position would be protected across other EU states. Aurelius opposed that application.
The judge yesterday ruled that protection under the directive applies pending the outcome of the Aurelius proceedings.
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