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SOURCE: Allied Irish Banks, p.l.c.
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December 22, 2008 02:12 ET
Allied Irish Banks, p.l.c. agrees capital measures with Irish Government
DUBLIN, IRELAND--(Marketwire - December 22, 2008) -
Allied Irish Banks, p.l.c. ("AIB") [NYSE: AIB] is issuing the
following announcement on reaching an agreement with the Irish
Government that will significantly increase the bank's core tier one
capital ratio. This agreement is subject to shareholder, regulatory
and E U Commission State aid approval. The key terms and conditions
are outlined in a statement issued yesterday, the 21st of December,
by the Minister for Finance which refers to the recapitalisation of
Irish banks. For ease of reference, the Minister's statement is
appended to this announcement.
Our decision to accept the Government's offer of EUR 2billion for an
issue by AIB of perpetual preference shares was taken following
detailed discussions between both parties. We have consistently
stated, including in our interim management statement (IMS) of the
5th of November 2008, that our capital position is good. We are
mindful though of the growing market expectation for banks everywhere
to have higher capital levels, a factor also acknowledged in our IMS.
Protection of the rights and interests of our investors is key to our
consideration and discussions with the Government. The agreement
reached satisfies that crucial requirement for the following reasons.
The preference shares will have a fixed coupon of 8%, will be non -
convertible, redeemable, rank alongside ordinary equity and will
qualify as core tier one capital. There are no restrictions on
payment of dividends on ordinary shares that we consider onerous.
Voting rights and appointments of directors requirements as outlined
in the Minister's statement can also be accomodated. It is agreed
that these requirements would end on redemption by us of the
preference shares. We estimate that the acceptance of this additional
EUR 2bn will increase our proforma core tier one capital to close to
7.5% at the end of 2008.
We acknowledge and are grateful to the Government for the commercial
approach it has adopted that has enabled us to reach this agreement.
In relation to the Government's commitment to underwrite and
otherwise support the raising of additional core tier one capital, we
have indicated our interest in seeking up to a further EUR 1bn from our
shareholders. Our endeavours will be strongly influenced by our
analysis of market conditions and the pre-emption rights of our
shareholders. As previously stated, we have the capacity to improve
our capital position through asset disposal. The raising of an
additional EUR 1bn would increase our core tier one capital ratio to an
estimated proforma level of between 8% and 8.5% at the end of 2008.
Eugene Sheehy, John O'Donnell and Alan Kelly will host a conference
call for analysts and investors today at 09.00 GMT
CONFERENCE CALL DIAL-IN DETAILS:
Please dial in 5 to 10 minutes prior to start time
Title: AIB agrees capital measures - access code 653816
Republic of Ireland +353 (0) 1 247 6150
UK +44 (0) 20 7111 1258
-ENDS-
For further information please contact:
Alan Kelly Catherine Burke
General Manager, Group Finance Head of Corporate Relations
AIB Group AIB Group
Dublin 4 Dublin 4
Tel: +353-1-6600311 ext. 12162 Tel: +353-1-6600311 ext. 13894
For Reference only - copy of Minister's statement - 21st December
2008
Government Announcement on Recapitalisation
Following on from Government Decisions of 28th November and 14th
December on the recapitalisation of financial institutions, the
Minister for Finance has this evening announced specific decisions in
relation to three major financial institutions. Commenting on the
announcement;
The Taoiseach said:
"The objective of these decisions is to ensure that the financial
system in Ireland meets the everyday financial needs of individuals,
businesses and the overall economy. As part of this recapitalisation
package, I am very pleased that a number of measures to support small
to medium businesses and mortgage holders have also been announced."
In relation to Anglo Irish Bank, the Minister for Finance announces
an initial investment of EUR 1.5 billion of core tier 1 capital to
assist in restructuring the bank's capital. The Government will
continue to reinforce the position of Anglo Irish Bank and will make
further capital available if required so that it remains a sound and
viable institution. The investment will be in the form of EUR 1.5
billion of perpetual preference shares with a fixed annual dividend
of 10%. The preference shares carry 75% of the voting rights of Anglo
Irish Bank. The investment is subject to the approval of the ordinary
shareholders at a general meeting which will be convened as soon as
possible. On the basis of positive contact with the European
Commission, the Minister said he was confident that the Anglo
proposal will meet with EU State Aid requirements when formally
notified in due course.
Good progress continues to be made in the capital discussions with
other institutions. In particular, subject to shareholder and
regulatory approval, the Government has agreed with Bank of Ireland
and Allied Irish Banks plc that they will each issue EUR 2bn of
perpetual preference shares to the State with a fixed annual dividend
of 8%. These shares will have voting rights in respect of change of
control and any changes in the capital structure. They will also
confer 25% of the voting rights in respect of appointments of
directors and 25% of the directors on the board, currently including
any directors to be appointed in connection with the Government's
Guarantee Scheme.
All the institutions may redeem the preference shares within 5 years
at the issue price or after 5 years at 125% of the issue price. The
preference shares are non-convertible and will be treated as core
tier 1 capital by the Financial Regulator and are replaceable only
with other core/equity tier 1 capital.
The capital injection for Anglo Irish Bank is likely to take place
following an Extraordinary General Meeting in mid-January, and for
Allied Irish Bank and Bank of Ireland, by the end of the first
quarter of 2009.
The Government has a substantial pool of additional capital available
to underwrite and otherwise support the issuance of core tier 1
capital by the relevant institutions.
The Government need not be the principal source of this additional
capital and encourages each institution to access private sources of
capital. Nonetheless, the Government is prepared to underwrite
further issuance of core tier 1 capital and both Allied Irish Banks
plc and Bank of Ireland have indicated an interest in such an
underwriting in an amount of up to EUR 1 billion each.
The measures announced today have been designed having regarded to
the recent European Commission Recapitalisation Communication and are
subject to State aid approval.
Credit Package
The provision of credit to the economy is the most immediate and
pressing issue for business and for the Government. The future health
of our economy is inextricably linked with the supply of credit and a
situation where banks are unwilling or are perceived to be unwilling
to lend is damaging not only for the economy but also for the banks
themselves. Banks have an important part to play in addressing this
issue and a key objective of the Government's recapitalisation
initiative is to ensure the continued flow of funds through the banks
to individuals and businesses in the real economy.
In response to my earlier meetings with the banks many had already
announced specific programmes to boost lending to small and medium
enterprises. AIB and Bank of Ireland have announced new business
support and start up funds and have provided commitments to support
first time buyers and consumers. While these announcements are
welcome the Government believes that it is appropriate as part of the
agreed recapitalisation programme that the banks should further build
on the commitments given in the banks guarantee scheme through
specific credit policies targeted at small medium enterprises, first
time buyers and consumers generally.
The recapitalisation announced today will provide the banks with the
stability required to continue to lend to meet the needs of the Irish
economy. The banks will be expected to contribute to the economy in a
verifiable manner in relation to credit and in relation to the
maintenance of a payments system which is socially inclusive. They
will be expected to adopt an approach to customer relationships in a
way which recognises that customers need support through difficult as
well as good times. The banks assure the Government that they will
continue to grow lending to small and medium sized enterprises and
have agreed to the following credit package:
* Small and Medium Enterprises: The recapitalised banks will
provide at least an additional 10% capacity for lending to small to
medium enterprises in 2009 from which lending will be subject to
demand from viable enterprises. (SMEs are to be defined in
accordance with the requirements under EU State aid Regulations.)
* Code of practice for business lending: Business lending by
the recapitalised banks will be supported by a new code of practice
for business lending which will be developed by the Financial
Regulator. The recapitalised banks have committed to work closely
with the Financial Regulator and the IBF to develop this code which
will be introduced before end of January 2009. The code will
provide for issues such as appropriate notice before change of
banking facilities, arrangements to work with small businesses in
difficulty and reassurance that sustainable and productive business
propositions will not be declined loan facilites.
* Mortgages/First time buyers: The recapitalised banks will
provide an additional 30% capacity for lending to first time buyers
in 2009. Take up will be subject to demand and the banks have
committed to actively promote mortgage lending at competitive rates
with increased transparency on the criteria to be met.
* Mortgage Arrears: The banks will take action to assist
householders who are in arrears. The recapitalised banks already
comply fully with the voluntary IBF Code on mortgage arrears and
repossession and refer customers to the Money, Advice and Budgeting
Service where appropriate. The banks have confirmed that those in
default on their home loans will treated with respect and that they
will work with mortgage holders to ensure that repossession is
truly an option of last resort. Furthermore the recapitalised banks
have confirmed to Government that they will wait at least six
months from the time arrears first arise before the enforcement of
any legal action on repossession of a customer's primary residence.
* Basic bank account: The recapitalised banks have committed
to broaden the provision of basic or introductory bank accounts and
will promote these accounts to socio-economic groups where the
holding of bank accounts is less prevalent and to those who find
that a current account does not suit their basic banking needs. The
Department of Social and Family Affairs will continue its
engagement with the financial institutions with a view to
increasing availability and demand for basic bank accounts. Each
bank can develop the form of its basic bank account in discussion
with the Financial Regulator and in all cases it will provide cash
card facilities. In support of this initiative the Government will
arrange that stamp duty will not apply to cash cards for basic bank
accounts. Detailed targets for basic bank accounts will be
negotiated with each institution.
* Environmental Improvements: Each recapitalised bank will
introduce a EUR 100m fund to support environment friendly investments
with a view to reducing energy usage, facilitating switching to
renewable energies with a view to reducing Ireland's carbon
footprint.
* Financial education: The recapitalised banks will provide
funding and other resources, in cooperation with the Financial
Regulator, to support and develop financial education for consumers
and potential consumers. The resources to be made available will
take account of the Financial Regulator's Financial Capability
Study and the Report of the Steering Group on Financial Education.
* Customer Communications: The recapitalised banks will
continue to improve the transparency of the terms and conditions of
products, of charges, of marketing and of sales processes and
procedures. Proposals in this regard will be submitted to the
Financial Regulator in January 2009.
ENDS
Note for editors:
The Government's announcement today is the next step in the
implementation of the recapitalisation programme for financial
institutions announced last weekend.
It involves investment of high-quality share capital in the three
main financial institutions in Ireland as follows:
AIB: EUR 2bn investment at 8% return per annum
BOI: EUR 2bn investment at 8% return per annum
Anglo Irish Bank: EUR 1.5bn investment at 10% return per annum
The main objective of the initiative is to ensure that the major
banks in Ireland are capitalised to meet the economy's financial
needs. This capital investment will ensure that capital ratios in the
Irish banks will meet the expectations of international investors.
The State will be remunerated on an annual basis in respect of this
investment with the equivalent of almost EUR 500m in dividends, either
in cash or in ordinary shares.
Shareholder, regulatory and European Commission approval will be
required.
The State will have significant voting rights, equivalent to 75%
control in Anglo Irish Bank, and 25% in respect of key issues in AIB
/ BOI.
The remuneration structure to the State is designed to encourage
institutions to redeem the State investment in due course.
Detailed terms and conditions for each proposed recapitalisation are
attached in the Annex.
Technical notes:
Core Tier 1 Capital: This is capital which is equivalent to ordinary
share capital, which a financial institution uses to absorb losses.
Preference Shares: This is a particular type of share capital which
confers particular rights, including priority payment of any
dividend.
The preference shares rank pari passu (equivalent) to ordinary shares
in liquidation. The annual dividend is non-cumulative and ranks pari
passu with dividend claims of other preference shares. Should cash
not be available to pay the preference share dividend then the bank
must issue ordinary shares to the State as payment in kind. In the
event that the preference share dividend is not paid in cash, no
dividend may be paid on the ordinary shares.
Non-convertibility: This means that preference shares are perpetual
(no fixed maturity date), and at no stage convert into ordinary
shares.
Coupon annual payment: This is the annual rate of return which is
payable on a preference share.
Annex
Sunday 21 December
Indicative Preference Share termsheet
(Subject to approval by the EU Commission and AIB shareholders)
Form of Security: Core Tier 1 non-cumulative Preference Share
Size: EUR 2.0bn
Transferability: Transferable, if voting rights removed
Dividend: * Fixed Dividend of 8% payable
annually at the discretion of the bank
* Dividends payable in cash. If not
able to pay in cash then paid in the form of
ordinary shares. Calculated on the basis of
unpaid dividend divided by the Share Value.
Share Value is calculated based on the
average daily closing price over the 30
trading days preceding the dividend
declaration date
* Payment of dividends made in
priority to dividends on ordinary shares
Term: Perpetual, no step-up
Redemption: * Redemption at issuers option
* Bank can repurchase at par for 5
yrs and thereafter at 125% of par, subject
to replacement of capital and IFSRA approval
* Replacement Capital needs to be
Core Tier 1
Ranking: Pari Passu to ordinary share capital on
liquidation and with other preference shares
for dividends
Dividend Stopper: Yes, if cash Preference Share dividend is
unpaid
Voting and appointment Right to appoint 25% of directors (currently
rights including any directors appointed under the
Government's Guarantee Scheme)
Voting rights in respect of:
* Changes in the capital structure
or any capital issuance or redemption by the
bank other than the redemption of these
preference shares
* Change of control transaction
over 50%
* Board appointments (so as to
leave the Minister 25% of total ordinary
voting rights)
Sunday 21 December
Indicative Preference Share termsheet
(Subject to approval the EU Commission and BOI shareholders)
Form of Security: Core Tier 1 non-cumulative Preference Share
Size: EUR 2.0bn
Transferability: Transferable, if voting rights removed
Dividend: * Fixed Dividend of 8% payable
annually at the discretion of the bank
* Dividends payable in cash. If not
able to pay in cash then paid in the form of
ordinary shares. Calculated on the basis of
unpaid dividend divided by the Share Value.
Share Value is calculated based on the
average daily closing price over the 30
trading days preceding the dividend
declaration date
* Payment of dividends made in
priority to dividends on ordinary shares
Term: Perpetual, no step-up
Redemption: * Redemption at issuers option
* Bank can repurchase at par for 5
yrs and thereafter at 125% of par, subject
to replacement of capital and IFSRA approval
* Replacement Capital needs to be
Core Tier 1
Ranking: Pari Passu to ordinary share capital on
liquidation and other preference shares for
dividends
Dividend Stopper: Yes, if cash Preference Share dividend is
unpaid
Voting and appointment Right to appoint 25% of directors (currently
rights including any directors appointed under the
Government's Guarantee Scheme)
Voting rights in respect of:
* Changes in the capital structure
or any capital issuance or redemption by the
bank other than the redemption of these
preference shares
* Change of control transaction
over 50%
* Board appointments (so as to
leave the Minister 25% of total ordinary
voting rights)
Sunday 21 December 2008
ANGLO IRISH BANK
Indicative Preference Share termsheet
(Subject to approval by the EU Commission and Anglo Irish
Shareholders)
Form of Security: Core Tier 1 non-cumulative Preference Share with
voting rights
Size: EUR 1.5bn
Transferability: Not transferable
Dividend: * Fixed Dividend of 10% payable, at the
discretion of the bank, annually on January 16th
* Dividends payable in cash. If not able
to pay in cash then paid in the form of ordinary
shares. Calculated on the basis of unpaid
dividend divided by the Share Value. Share Value
is calculated based on the average daily closing
price over the 30 trading days preceding the
dividend declaration date
* Payment of dividends made in priority
to dividends on ordinary shares
Term: Perpetual, no step-up
Redemption: * Redemption at issuers option
* Bank can repurchase at par for 5 yrs
and thereafter at 125% of par, subject to
replacement of capital and IFSRA approval
* Replacement Capital needs to be Core
Tier 1
Ranking: Pari Passu to ordinary share capital on liquidation
and with other preference shares for dividends
Dividend Stopper: Yes, if cash Preference Share dividend is unpaid
Voting rights * Full voting rights as long as
preference shares outstanding
* Voting rights to represent 75% of
total voting rights
Timetable: Sunday, 21 Dec, 2008: Announce EUR 1.5bn capital
injection
Tuesday, 23rd Dec, 2008: Anglo to publish
Shareholder circular
Friday, 16th Jan, 2009: EGM held to approve capital
increase
Other Items: * Management and Board change
* Board will have Government
representation
* Restructuring plan after six months in
line with EU Commission guidance
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
Copyright © Hugin AS 2008. All rights reserved.