GoldmanSachs to advise Government on recouping AIB bailout

The Government has picked Goldman Sachs to advise on how to recoup a €21bn taxpayer bailout of AIB.

The appointment is scheduled for six months, though may last longer, the Department of Finance said in an emailed statement yesterday.

Naming Goldman Sachs doesn’t necessarily mean the state will sell shares in AIB in 2015, the ministry said, as a “considerable amount of work” remains to be done on the lender’s capital structure.

“I am confident that over time we will, at a minimum, fully recover the funds that this government invested in AIB, Bank of Ireland and Permanent TSB,” Finance Minister Michael Noonan said.

The current administration injected €14.8bn, or about 70%, of AIB’s state bailout after a real estate crash in 2008. The bank’s rescue accounted for a third of the €64bn Ireland pumped into its financial system during the crisis.

Mr Noonan said last month the Government may sell part of its 99.8% stake in the nation’s second-largest lender by assets within two years.

The bank’s chief executive David Duffy has said he may begin repaying the rescue by redeeming €1.6bn of state-owned contingent convertible notes.

The NTMA valued the state’s equity stake and €3.5bn of preferred stock in AIB at €11.7bn at the end December, it said last week.

The Government’s contingent convertible notes are held separately. Before a share sale begins, the state may convert some of its preferred stock in AIB into ordinary shares to reorganise its capital structure, the bank has said.

“Our view on AIB remains that an initial stake sale of at least 25% will happen this year, but likely not before the third quarter, in view of the time required for consultancy and to draw up a prospectus and carry out a full global market tour,” said Fiona Hayes, an analyst with Cantor Fitzgerald LP in Dublin.

AIB passed ECB stress tests in October with a common equity tier 1 ratio, a gauge of financial strength, of 12.4% in a baseline scenario compared with a minimum acceptable 8% rate.

“Following its favourable stress test outcome and a European Banking Authority ruling that facilitates the early redemption of state-owned contingent convertible notes, we expect AIB will seek to redeem the €1.6bn of contingent convertible notes through the issuance of lower tier 2 and additional tier 1 subordinated bonds,” said Emer Lang, an analyst with securities’ firm Davy.

Bloomberg

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