AIB clears court privatisation hurdle

State-owned AIB is on its way back to privatisation after the Commercial Court approved its application to reduce its share capital by €5bn.

The move means the bank will have the option of paying a dividend to shareholders, the largest of which is the State, which in 2009, through the National Pensions Reserve Fund Commission (NPRFC), acquired €3.75bn in shares giving it 99% of the company’s ordinary shares.

Under the capital reduction, those shares can ultimately beredeemed by AIB from distributable profits or further share issue.

The court heard there were no objections to the capital reduction application from creditors or from AIB pension fund trustees in Ireland and the UK.

This followed assurances from the company in relation to a deficit of around €600m in the main defined benefit pension scheme covering 17,500 members, 9,000 of whom are current employees. The average pension being paid out to around 3,900 current pensioners is €30,000 per annum, the court heard.

The finance minister, the Central Bank, and the NPRFC also supported the application.

Mr Justice Peter Kelly yesterday approved a reduction of €1.07bn in the bank’s share premium account and by €3.9bn in its capital redemption reserve.

He noted AIB “effectively went into State ownership” after the NPRFC put €3.75bn into the company in 2009. Since then it had been endeavouring to improve its capital position.

The purpose of the capital reduction was to generate distributable reserves enabling it, subject to regulatory requirements, to strengthen its capital position in order to return to private ownership, the judge said.

There were no objections from creditors or the pension trustees to the application and he was satisfied by the evidence presented to him that there was no prejudice to creditors if the court approved it.

That evidence included that the company would have more than sufficient liquidity to meet creditors’ claims.

He was satisfied with measures to deal with the deficit in the pension fund and that this matter had been the subject of negotiation and debate involving the trustees, the company and the pension authority. He noted assurances from the bank, in affidavits on its behalf, on funding the scheme into the future.

Earlier, Denis McDonald SC, for AIB, said the bank’s assets over liabilities stood at €12.6bn and on that basis alone meant it was more than in a position to meet any claims from creditors or the from the pension funds.

He also pointed to the fact that no creditors had turned up in court to object and that the trustees of both the UK and Irish pension funds had written saying they had no objection.

Brian O’Moore SC, for the Irish pension fund trustees, said it was in the interests of pension fund members that the bank would be in as healthy a position as possible. That remained their position that they were not objecting to the capital reduction. But that was on the basis of assurances given by the bank as to the funding of the scheme as there had been differences between the parties as to what funding was required, he said.

James Doherty BL, for the UK pension trustees, said they also did not object to the application.