AIB will pay the State €1.866 billion tomorrow after receiving shareholder approval for a major capital reorganisation that also puts it on the path back to private sector ownership.
This will mark the first repayment by AIB of the €20.8 billion in bailout funds that it received from the State following the global financial crash in 2008.
AIB will pay the Government €1.7 billion in to redeem 1.36 billion of the 3.5 billion preference shares held by the State. It will also pay a dividend of €166.4 million relating to these shares.
In addition, the balance of preference shares will be converted to ordinary stock for the State and will be admitted for trading on the junior ESM market in Dublin on December 18th.
AIB will also press ahead with a consolidation of its share base, issuing one new share for every 250 held by investors. This will have the effect of reducing the number of shares in issue to 2.7 billion. The new shares will begin trading at 8am on December 21st.
AIB has agreed to the potential issue of warrants of up to 9.99 per cent of the bank’s issued ordinary share capital to the minister for finance at the time of any re-admission of its ordinary shares to a regulated market. And the minister has agreed to redeem the EBS promissory note.
With the State owning 99.8 per cent of the bank, approval for the capital reorganisation was never in doubt but AIB was required to hold an extraordinary general meeting in Dublin to put 12 resolutions to all shareholders.
At the meeting in the RDS, AIB's chairman Richard Pym said the capital reorganisation would "both strengthen and simplify" its capital structure and position the bank to transition from State to private sector ownership.
Mr Pym told shareholders that since the global financial crash in 2008 and its bailout by taxpayers, AIB has paid about €3 billion to the State in fees related to the Government’s guarantees, and coupon payments on the preference shares and contingent capital notes held by the State.
“Today marks the start of our repayment of the capital and we remain grateful to the Government and taxpayers for their continued support,” Mr Pym said.
Mr Pym told shareholders that he intended to take a poll on each resolution at the end of the EGM, even though the proposals were supported by the Minister for Finance Michael Noonan, who holds 99.8 per cent of the shares.
AIB received a bailout of €20.8 billion from the State post the crash in 2008. In response to a question from a shareholder, AIB chief executive Bernard Byrne said he expects the bank would repay "all of its money (to the State) in a reasonable timeframe".
Mr Byrne indicated to media after the meeting that this could be a period of five to 10 years.
Mr Pym said the resolutions being voted on at the EGM would give the company a “market-standard capital structure” and would prepare the bank for a main stock market listing.
He said that the timing of an IPO would be subject to market conditions but he expects “very strong investor appetite for the stock” whenever it is brought to the stock exchange, highlighting how two recent debt issuances by the bank were oversubscribed.
Mr Byrne rejected criticism from investment adviser Brendan Burgess that AIB was overcharging its non-tracker mortgage customers. Mr Burgess argued that average mortgage rates across the EU amounts to about 2 per cent while AIB's average rate is closer to 3.5 per cent.
He said that whenever competition comes back into the Irish market, AIB’s profits would be hit. Mr Byrne responded by saying the bank, unlike its rivals, had reduced its standard variable rate three times over the past 12 months.
Mr Pym rejected a suggestion from TD Shane Ross that AIB should suspend its shares as they were “grossly overvalued” and people who have bought the shares recently stand to lose a lot of money when the capital reorganisation is completed.
The shares are currently trading at about 3.5 cent while the bank is proposing to convert some of the preference shares held by the State to ordinary shares for 1.7 cent each as part of the capital reorganisation being voted on at the EGM. This effectively puts a new floor on the bank’s share price.
Mr Pym said the company had repeatedly warned investors that the shares were overpriced and, as such, there is no more information that it can place in the market.
He said the bank would not be seeking a suspension of its shares as it would “mean that no-one in this room could deal in the shares if they wanted to” and “I don’t think it’s up to the company to deny you that opportunity to sell your shares”.
