merrion street

The Minister for Finance, Mr. Michael Noonan T.D., today said:

"I welcome the decision by Abadi & Co. Securities Ltd. to withdraw the High Court challenge it had brought to the making of the Subordinated Liabilities Order in respect of Allied Irish Banks plc.

The abandonment of the legal action by Abadi & Co. Securities Ltd. entirely vindicates my view and that of the Government that the challenges were unfounded and that the State is proceeding in a legally robust and fair manner to deal with a crisis that should not be borne entirely by the Irish State and the Irish taxpayer. No financial incentive was made or offered to the applicant as part of the agreement to withdraw other than a payment in respect of their legal costs.

AIB has remained solvent due to the ongoing overwhelming financial support of the State and without this support the entire investment held by subordinated bondholders’ would have been likely irrecoverable. Therefore, I consider it entirely fair that subordinate bondholders should share in a proportionate manner in the burden of the recapitalisation costs of the banks."

The Minister notes that there were only two challenges taken to the subordinated liabilities order, and one of them has now been dropped. We continue to fight the other challenge. The withdrawal of the Abadi challenge and the fact that they have undertaken to participate in the Allied Irish Banks LME announced on 11 May shows that most investors understand and are aware that what the Government has done is a fair measure and offers a final market based opportunity to exit their investments.

The AIB LME is due to complete later this month and the Minister would like to restate his commitment that, to the extent the LME does not generate the required level of core tier 1 capital, the Minister will take whatever steps are necessary under the Stabilisation Act or otherwise to ensure that the required level of burden sharing in all of these banks is achieved.

It is Government policy to achieve appropriate burden-sharing from holders of bank subordinated debt not only in AIB but also in Bank of Ireland, EBS Building Society and Irish Life & Permanent where liability management exercises are all underway. The Minister would like to restate his commitment to take whatever steps are necessary under the Stabilisation Act or otherwise to ensure that the required level of burden sharing in all of these banks is achieved.