AIB has successfully raised €500 million in additional Tier 1 capital following strong demand from investors. The coupon for the initial fixed-rate period until December 2020 has been set at 7.375 per cent.
The transaction was arranged by Morgan Stanley, Deutsche Bank, Bank of America Merrill Lynch, HSBC, Davy and Goodbody Stockbrokers and attracted about €4.75 billion of total demand from investors. The final order book was more than nine times over-subscribed.
This is the latest debt market issuance by AIB. On November 19th, it agreed to issue €750 million in Tier 2 capital. The subordinated notes have a maturity of 10 years, with one call option after five years and a coupon of 4.125 per cent.
That transaction attracted more than €5 billion of demand from investors. The final order book was more than six times over-subscribed and attracted interest from 300 investors in 26 countries.
‘Very encouraging’
AIB chief executive Bernard Byrne said the success of its two capital raisings recently was "very encouraging" for the company as it moves to simplify its capital structure.
“The results demonstrate market confidence in AIB as an issuer,” he added. “The significant participation by overseas investors, in both transactions, is an endorsement ... of the progress that the bank has made in recent years in restructuring and repositioning itself as a sustainable, profitable and investable business.
“These issuances are key stepping stones in ensuring the completion of the simplification of our capital structure by the end of 2015. This will enable the repayment of capital to the State and positions us well for a return to private ownership.”
This latest capital raising is part of a wider reorganisation by AIB as it moves towards repaying some of its €20.8 billion in bailout funds it received from the State following the crash, and a stock market IPO, probably in 2016.
This involves the partial redemption of the 2009 preference shares: which will result in the payment of €1.7 billion to the State, and the conversion of the remainder of these shares into ordinary stock.
Share consolidation
In addition, AIB is planning to consolidate the number of ordinary shares in issue on a 1-for-250 basis, reducing the number of shares to about 2.7 billion.
AIB also plans to redeem the EBS promissory note held by the Government and has agreed to the potential issue of warrants of up to 9.99 per cent of AIB’s issued ordinary share capital to the State at the time of any readmission of its shares to the stock market.
Separately, the bank will also make a further repayment to the State of €1.6 billion in July 2016 on maturity of the contingent capital notes, or CoCos as they are otherwise known.
