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Does this amount to a default or merely extortion?

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  • 01-12-2009 11:46pm
    #1
    Dannyboy83
    Registered Users Posts: 4,236 ✭✭✭


    http://www.rte.ie/business/2009/1201/aib.html

    AIB can pay cash to State - EU
    Tuesday, 1 December 2009 17:28
    The European Commission has indicated that it will allow AIB to pay the State cash in return for investing preference shares in the bank.

    Earlier today AIB said it was suspending interest payments on some bonds following a ruling by the Commission on Government aid.

    An unintended consequence of the ruling was that the State could could lose out on a payment of €280m due in May 2010 from AIB.

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    But in a statement late this afternoon the Commission said it 'will support efforts of AIB to raise private capital, including measures aimed at providing adequate remuneration to the Government's preference shares without necessarily diluting existing shareholders'.

    If AIB did not pay the Government in cash, the State would be likely get an increased shareholding in the bank. This could raise its stake from 25% to 40%.

    The EU issued guidelines on the payment of discretionary coupons on debt instruments in October to ensure burden sharing with bond holders.

    AIB has obligations on €760m of tier one and upper tier two securities which are affected by the announcement. The decision affects the payment of €350,000 which had been due on 14 December.

    European Commission competition authorities have stopped several banks, including Royal Bank of Scotland, from paying dividends on some securities as a condition of the state aid they have received.

    AIB shares closed down three cent at €1.52 in Dublin - down 1.9%

    Does this amount to a default, or is it merely extortion?


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