Court fast-tracks challenge to AIB order

THE High Court has agreed to fast-track a legal challenge by two New York-based investment firms to the Government’s plan to buy back debt from subordinated bondholders in AIB at a significant discount.

The court has fixed June 2 for the hearing of the case which has implications for the Government’s proposals to recapitalise Irish banks.

The firms are challenging a subordinated liability order (SLO) obtained by Finance Minister Michael Noonan from the court last month in what John Gordon, counsel for Aurelius Capital Management, described as an effort to “beat” the subordinated bondholders into divesting themselves of their bonds in AIB at a “steep” discount.

Aurelius and the second firm, Abadi & Co, initiated their proceedings on April 20, days after the minister secured the SLO in an effort to achieve some burden sharing by bondholders in AIB’s recapitalisation.

The SLO allows the minister change terms, conditions and maturity dates on certain bonds.

The cases were before the president of the High Court, Mr Justice Nicholas Kearns, yesterday for case management purposes.

Brian Murray, counsel for the minister, said the matter was “critically urgent” as the disputed order was critical to the recapitalisation of AIB which the state had agreed with the EU and IMF to have completed by July 31. It also affected plans to recapitalise other banks and coupon payments of more than €100 million would be payable to bondholders by the end of next month unless the minister could proceed as planned.

Urging the judge to fast-track the cases at a speedier pace than that proposed by the applicant firms, counsel suggested a time scale that would involve the full case, plus any appeal to the Supreme Court, being heard and determined by July 31, the end of the legal year.

Mr Gordon and Jim O’Callaghan, counsel for Abadi, both accepted the matter was urgent but argued the time-scale proposed by the minister would impose inordinate pressure on them. They also argued the time pressures were created by the decision of the minister to apply at the “last possible minute” for the disputed SLO.

Mr Justice Kearns said he had been told the minister regarded this matter as one of “extreme urgency” and must attach appropriate weight to that. He was also told the minister could have moved more speedily but that did not now determine the timing of the case.

The judge remarked the sides had not addressed the matter of judicial resources required and the High Court would need time to consider the issues and did not have the massive resources available to the sides. There might also be an appeal and, in the circumstances, he would grant the minister’s application for a trial date of June 2.

The judge heard the minister had agreed to provide a copy of the full affidavit grounding his April court application to the firms on condition certain price sensitive material in that document, which had been redacted or blacked out, is only made available to lawyers and experts for the firms.


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