RATINGS AGENCY Moody’s has described Bank of Ireland’s proposed subordinated debt buy-back as “a form of default”.
The ratings agency said it would classify the transaction, which was announced by the bank on Wednesday, as a “distressed exchange” and downgrade the securities to Ca, though the rating could be upgraded shortly afterwards to the rating level for the bank’s dated subordinated securities.
Moody’s says it defines “distressed exchange” as an offer by an issuer to creditors of a new or restructured debt with the effect of allowing the issuer to avoid bankruptcy or payment default. This means that distressed exchange is a form of default.
Moody’s reiterated the dated subordinated debt of Bank of Ireland is currently on review for possible downgrade as a result of the Government’s confirmation that it may impose losses on subordinated debt holders.
Standard Poor’s also announced yesterday it was classifying Bank of Ireland’s proposed exchange offer as a distressed exchange, and lowering its ratings on the instrument, though it too said it expects to raise the ratings at the end of the offer period.
Meanwhile, Fitch has downgraded the credit rating of AIB and Bank of Ireland’s long-term and short-term debt on the back of its downgrade of Ireland’s sovereign debt on Thursday.
The ratings agency downgraded AIB and Bank of Ireland’s long and short-term issuer default ratings from A- to BBB and from F1 to F2. It said the outlook on the long-term debt issuer default rating was stable.
The ratings agency also downgraded the guaranteed debt of AIB, Bank of Ireland, Anglo Irish Bank, EBS and Irish Nationwide.
Fitch said, while the previous ratings for the issuer default ratings of the banks reflected the fact the banks had received sovereign support following severe business strains, the “reduced financial flexibility” of the State means the level of support that the sovereign can provide to its largest banks has diminished.
AIB’s lower tier two subordinated debt was also downgraded by Fitch from BBB to C.
The individual ratings of AIB, Bank of Ireland, Irish Life and Permanent and EBS were also downgraded.
