One of the two New York-based investment firms challenging plans to share losses with AIB bondholders said it is "confident a mutually acceptable" resolution can be found.
Abadi and Co and Aurelius Capital Management filed cases on April 20th against the Government's plans to change the terms of AIB's subordinated debt. The bank is 93 per cent State-owned.
"We would be willing to enter into a constructive dialogue with the finance minister," Carlos Abadi, president of Abadi and Co, said in an e-mailed response to questions. The proposals "would appear to interfere with fundamental property rights of creditors", he said.
The cases would be the first test of the plan to share the €70 billion cost of bailing out financial system with bondholders. The two cases are "entirely unfounded" and the Government remains "fully committed" to burden sharing with subordinated bondholders, Minister for Finance Michael Noonan said last week.
Mr Noonan has said he expects the bank to discount bonds by as much as 80 per cent.
On April 14th, the Government won an order from the High Court allowing Mr Noonan to change the terms of AIB debt, using bank laws introduced last year in the wake of the financial collapse. The State has already poured €7.2 billion into the bank, which needs another €13.3 billion in capital, according to stress tests.
The judgment makes the payment of interest on some debt optional and lifts restrictions on buybacks or redemptions of some
junior bonds. The same day, Mr Noonan said the Dublin-based bank will seek to buy back debt, allowing bondholders "voluntarily exit" their investments.
If that isn't successful, the Government will take "whatever other action is necessary to ensure appropriate burden sharing," Noonan said in a statement on April 14th.
A compromise may be possible way "if the parties sit down and negotiate in good faith," said Mr Abadi, who declined to say how much Allied Irish debt he owns or when he bought it.
"One possibility would consist in a non-coercive liability management exercise which would enable AIB to raise significant capital while not tarnishing the image of either the bank or Ireland in the international capital markets," Mr Abadi said.
AIB has raised €2.97 billion over the past two years from buying back and exchanging subordinated bonds at discounts to face value.
The challenges are due to be heard in the High Court in Dublin next month. A spokesman for the Minister said yesterday there was no further update to the April 22nd statement.
In a letter to Mr Noonan and the bank seen by Bloomberg News, Aurelius said the Government is displaying a "disregard for the basic precepts of fairness and due process." Aurelius had no comment to make, according to spokeswoman Jennifer Burner
Bloomberg
