Challenge to ministerial order on AIB burden-sharing settled

A CHALLENGE by a Cayman Islands investment firm – Aurelius Capital Master and linked firms – to a ministerial order clearing the way for some burden-sharing by junior bondholders in AIB was settled and struck out on consent at the High Court yesterday.

As a result, Mr Justice John Cooke made an order that the disputed Subordinated Liabilities Order, which allows AIB impose losses up to 90 per cent on junior bondholders, became effective on April 22nd last.

Counsel for other junior bondholders earlier failed in a last-minute bid aimed at requiring AIB to pay €8 million due under a coupon payment last Saturday.

The sum was not paid following an AIB application to the court last Friday to be permitted to defer that payment pending the outcome of the Aurelius case.

Senior counsel Michael Cush said he was representing two noteholders, and his clients were only interested in the coupon payment monies lodged in court last Friday. His clients had an €8 million interest in that coupon payment, AIB was aware of that and should have paid the coupon, he said.

Lawyers for Aurelius, AIB and the State argued Mr Cush had no legal standing to make any application as the five-day period for any bondholders to challenge the order had expired last April.

Senior counsel Paul Gallagher for AIB said the bank had no liability to pay the June 25th coupon because of the order.

The court also heard the total €21 million coupon payment had not actually been lodged in court to date because talks began in the Aurelius case as the official court order for payment of those monies was still being finalised.

Mr Cush said he had thought the monies were lodged in court. He also agreed his clients had not challenged the order within the statutory time period.

Having heard the parties, Mr Justice Cooke ruled Mr Cush was not entitled to be heard relating to the coupon payment monies.

Having received confirmation from senior counsel John Gordon, for Aurelius, that the case could be struck out on consent, the judge then made three orders sought by senior counsel Brian Murray for the Minister for Finance, with the consent of Aurelius and AIB.

He made orders striking out the proceedings and directing that the order became effective on April 22nd last in relation to the two classes of bonds held by Aurelius. The court previously found the order was effective for the 16 other classes of securities identified within it that were not held by Aurelius.

The judge also vacated his order of June 24th last requiring AIB to pay the €21 million coupon payment monies into court.