ALLIED IRISH Banks (AIB) will offer a 12.5 per cent annual coupon on up to €2.7 billion of bonds it wants to issue in a debt swap to boost its core tier one capital ratio, the key measure of the bank’s loss-absorbing capital.
AIB needs to raise an additional €1.5 billion in capital on top of a €3.5 billion Government injection this year to absorb losses on impaired property loans, and could raise between €700 million and €900 million of this from the debt deal, according to analysts.
The bank said last week that it would pay between 50 and 67 cent on the euro – depending on the type of note being exchanged – with the new bonds, which offer investors a better form of security.
The bulk of the loan notes AIB wants to swap with investors are quoted at between 35 and 45 per cent of their nominal value.
Irish banks, like British counterparts, are taking advantage of steep discounts in the debt markets tobuy back bonds. Regulators and investors view lower quality notes as almost worthless, leaving banks to focus on shoring up core tier one capital.–(Additional reporting: Bloomberg)
