Yesterday’s downgrade covers senior debt owned by AIB, Bank of Ireland, Anglo Irish Bank, the Irish Nationwide Building Society (INBS) and EBS Building Society. Between them, the five institutions have €15.2 billion in senior unsecured debt. Of that, AIB accounts for €5.8bn, Bank of Ireland for €5.2bn, Anglo Irish Bank €3.1bn, the EBS €500m and INBS €630m.
Moody’s has cut AIB’s relevant debt rating from ‘Baa3’ to ‘Ba2’; Bank of Ireland’s from ‘Baa2’ to ‘Ba1’; Anglo’s rating from ‘Ba3’ to ‘Caa1’; INBS from ‘Ba3’ to ‘Caa1’ and the EBS from ‘Baa3’ to ‘Ba2’. The agency also cut its debt rating for Irish Life & Permanent (IL&P) — the only non- NAMA-related entity of the relevant Irish banks — from ‘Baa3’ to ‘Ba2’.
Moody’s said that recent statements made by Irish politicians — both in Government and opposition — seemed to cast doubt on the State’s willingness to support the banks further and instead put more of the cost onto bondholders.
Earlier this week, Finance Minister Brian Lenihan said a substantial discount on €20bn-worth of unsecured senior bank bonds was being sought as a way of sharing the cost burden regarding the banks, and that opposition parties are singing from the same hymn sheet.
“While some of these statements may reflect the current pre-election debate, Moody’s is increasingly concerned that they represent a growing underlying threat for senior creditors,” the rating agency said.
The European Central Bank (ECB) rejected the Government’s call for a greater bondholder burden share in December, even though the Government has pumped close to €50bn into propping up the country’s banking system. Irish banks have another €6bn of combined subordinated debt, €21.8bn senior secured debt and €16bn in government-guaranteed debt.