AIB failure to pay interest on Notes
Posted: June 12th, 2017, 11:48 pm
Is anyone else sore about AIB failing to pay interest on its notes, while making distributions of "excess" capital to its ordinary shareholders?
Irish-Government-owned AIB (hereafter "the Bank" or "AIB") still has one or two series of dated subordinated notes outstanding which were subject to a Subordinated Liabilities Order ["SLO"] made effective by the High Court in an declaration dated 1 July 2011.
The particular series I refer to are the 12.5 per cent Subordinated Notes due June 2019 ("the Notes") of which £79 million is still outstanding. I hold some of these Notes. The effect of the SLO was to make interest payments on the Notes optional (i.e. at the discretion of the board) and extend their maturity to 2035.
Recently, AIB declared and then on 9 May 2017 paid a cash ordinary dividend totalling EUR250m. This payment was justified by the Bank's "strong profitability and capital ratios". Furthermore, the Irish Finance Minister considers the postition of AIB strong enough to have announced a sale of 25% of the State's equity holding to the public, the Prospectus having been released today:
https://aib.ie/content/dam/aib/investor ... 062017.pdf
This prospectus fails to make any disclosure about the non-payment of interest on the Notes or the risks attendant in the concommitant upending of the creditor hierarchy. The prospectus has long detailed descriptions of Policy on the Payment of [optional] Ordinary Dividends but is utterly silent on any policy regards payment of optional interest on the more senior Notes.
To date I have seen no announcement of intention to pay the forthcoming 25 June 2017 interest payment on the Notes, so can only assume that yet another payment will be missed. Failing to pay interest right after the distribution an ordinary dividend seems to me unconsionable and I think it's time to take action.
What are the thoughts of other Lemon Fools?
GS
Irish-Government-owned AIB (hereafter "the Bank" or "AIB") still has one or two series of dated subordinated notes outstanding which were subject to a Subordinated Liabilities Order ["SLO"] made effective by the High Court in an declaration dated 1 July 2011.
The particular series I refer to are the 12.5 per cent Subordinated Notes due June 2019 ("the Notes") of which £79 million is still outstanding. I hold some of these Notes. The effect of the SLO was to make interest payments on the Notes optional (i.e. at the discretion of the board) and extend their maturity to 2035.
Recently, AIB declared and then on 9 May 2017 paid a cash ordinary dividend totalling EUR250m. This payment was justified by the Bank's "strong profitability and capital ratios". Furthermore, the Irish Finance Minister considers the postition of AIB strong enough to have announced a sale of 25% of the State's equity holding to the public, the Prospectus having been released today:
https://aib.ie/content/dam/aib/investor ... 062017.pdf
This prospectus fails to make any disclosure about the non-payment of interest on the Notes or the risks attendant in the concommitant upending of the creditor hierarchy. The prospectus has long detailed descriptions of Policy on the Payment of [optional] Ordinary Dividends but is utterly silent on any policy regards payment of optional interest on the more senior Notes.
To date I have seen no announcement of intention to pay the forthcoming 25 June 2017 interest payment on the Notes, so can only assume that yet another payment will be missed. Failing to pay interest right after the distribution an ordinary dividend seems to me unconsionable and I think it's time to take action.
What are the thoughts of other Lemon Fools?
GS