Burned AIB bondholder to re-investTuesday, March 05, 2013 By Joe Brennan and John Glover New York investment banker Carlos Abadi was among the losers when AIB imploded, wiping out $6.3bn (€4.85bn) of junior bonds. Two years later, he’s willing to buy the lender’s debt again.
The president of Abadi & Co said the restructuring of AIB, which cost taxpayers $27.6bn, has restored capital to levels acceptable to bondholders.
The country’s second- biggest lender posted a core Tier 1 capital ratio of 17.3% in June, compared with the 10.5% required by regulators as a buffer against losses.
AIB has €3bn of debt due this year, according to data compiled by Bloomberg, and is planning its biggest fundraising since a bailout forced investors to accept as much as 90% less than they were owed. AIB now wants to sell senior unsecured and subordinated debt after issuing its first covered bond in more than five years in November, CEO David Duffy said last month.
“Senior debt would be a slam dunk and sub debt is also credible for the right clientele at the right pricing level,” said Mr Abadi, whose expects his ACGM broker- dealer unit to be a likely buyer of the debt.
“I’m prepared to extend new financing to AIB. Post restructuring it has a very strong capital position.”
He said his company “suffered a significant loss” on its AIB debt holdings. He started a legal challenge to the burden-sharing which was withdrawn in Jun 2011, days before it was due to go to court, with the Government making a contribution to his legal costs.
New York-based Aurelius Capital Management LP, which reached a settlement with the Government after a court hearing, said at the time that bondholder losses “would chill foreign investment in Ireland for years to come”.
AIB, which is 99.8% state- owned, returned to public debt markets in November for the first time since Mar 2010, selling €500m of covered bonds backed by home loans to yield 270 basis points to the benchmark mid-swap rate. That spread has since narrowed to 164 basis points, compared with a 36 basis-point decline to 93 in the average spread on the bonds in Bank of America Merrill Lynch’s Euro Covered Bond Index.
The lender posted combined net losses of €16.2bn between 2009 and the first half of last year, according to the most recent company reports, and Mr Duffy does not forecast the bank returning to profit until 2014.
The bank’s deposits rose 5% in the first half of last year to €63.6bn, the first underlying increase since outflows started in Irish banks in 2009. |
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