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S&P slashes Allied Irish Banks lower tier 2 debt to CCC
(ADPnews) - Dec 17, 2010 - S&P today cut its rating on Allied Irish Banks' (ISE:ALBK) lower tier 2 securities to CCC from B citing a "clear and present risk" of a restructuring of this nondeferrable subordinated debt.
At the same time, the service maintained the BBB/A-2 ratings on the bank and kept intact the ratings on other issues benefiting from a government guarantee. However, the counterparty credit ratings of the bank remain on "negative" watch pending the outcome of a rating review on Ireland.
The Irish Cabinet passed a law that empowers the finance minister to make subordinated debt orders to pass some of the risk onto subordinated creditors of state-backed institutions.
At the same time, the bank was required by regulators to raise EUR 9.8 billion in core tier one capital by the end of February 2011, which increases the possibility of a debt exchange, given its very limited access to external funding.
Besides, Bank of Ireland, another domestic lender facing much smaller capital requirement than Allied Irish Banks, has carried a subordinated debt exchange, the service noted.
If Allied Irish Banks follows suit and announces a debt exchange, the ratings on the lower tier 2 instruments will be slashed further to D, or default, as the agency views the offer as a "distressed exchange".
The counterparty credit ratings on Allied Irish Banks combine its stand-alone credit profile assessed at bb-, given its weak liquidity and poor asset quality, and a four-notch uplift due to significant recent and future government and central bank funding including capital injections and transfer of its sour loans into the "bad" bank NAMA.
The bank's solid market position supports its credit profile but uncertainties related to the complex banking sector overhaul, the centrepiece of an international bailout package, constrain its credit standing, S&P added.
A sovereign downgrade will trigger the same move on the bank in view of their close interrelation. Also, a further weakening of its funding profile, or a change in its business profile in the context of the banking sector shake-up would push its ratings down.
(ADPnews) - Dec 17, 2010 - S&P today cut its rating on Allied Irish Banks' (ISE:ALBK) lower tier 2 securities to CCC from B citing a "clear and present risk" of a restructuring of this nondeferrable subordinated debt.
At the same time, the service maintained the BBB/A-2 ratings on the bank and kept intact the ratings on other issues benefiting from a government guarantee. However, the counterparty credit ratings of the bank remain on "negative" watch pending the outcome of a rating review on Ireland.
The Irish Cabinet passed a law that empowers the finance minister to make subordinated debt orders to pass some of the risk onto subordinated creditors of state-backed institutions.
At the same time, the bank was required by regulators to raise EUR 9.8 billion in core tier one capital by the end of February 2011, which increases the possibility of a debt exchange, given its very limited access to external funding.
Besides, Bank of Ireland, another domestic lender facing much smaller capital requirement than Allied Irish Banks, has carried a subordinated debt exchange, the service noted.
If Allied Irish Banks follows suit and announces a debt exchange, the ratings on the lower tier 2 instruments will be slashed further to D, or default, as the agency views the offer as a "distressed exchange".
The counterparty credit ratings on Allied Irish Banks combine its stand-alone credit profile assessed at bb-, given its weak liquidity and poor asset quality, and a four-notch uplift due to significant recent and future government and central bank funding including capital injections and transfer of its sour loans into the "bad" bank NAMA.
The bank's solid market position supports its credit profile but uncertainties related to the complex banking sector overhaul, the centrepiece of an international bailout package, constrain its credit standing, S&P added.
A sovereign downgrade will trigger the same move on the bank in view of their close interrelation. Also, a further weakening of its funding profile, or a change in its business profile in the context of the banking sector shake-up would push its ratings down.
