Aurelius Capital Comments on Allied Irish Banks' Tender Offer

NEW YORK, May 15, 2011 /PRNewswire/ -- Aurelius Capital Management, LP today issued the following statement regarding the pending tender offer by Allied Irish Banks for its subordinated bonds.  Aurelius is the investment manager for three funds that own such bonds.  The Aurelius funds have appealed the Subordinated Liabilities Order issued last month at the request of the Irish Ministry of Finance.

"We do not object to Allied Irish Banks ('AIB') commencing a bond tender offer during the pendency of our appeal from last month's Subordinated Liabilities Order ('SLO').  The new tender offer proves our contention that the Irish Ministry of Finance egregiously discriminated against US investors by excluding them from AIB's prior tender offer at a far higher price and then imposing the punitive SLO on them.  It adds insult to injury that the Ministry obtained the SLO without first allowing AIB to conduct a coercive tender offer of the sort that worked for Anglo Irish Bank without resort to an SLO.  Despite these missteps, AIB has already generated about euro 3 billion of capital through prior bond tender offers without an SLO.

"The financial challenges facing Ireland are very serious, to be sure.  But even serious challenges are best solved intelligently, honorably, and with respect for the fundamental commercial and legal norms that form the bedrock of advanced societies and economies.  We call upon the Ministry to do so.  A good way to start is to meet with us rather than dismissing our overtures.

"This is not the forum for recounting the many ways in which the SLO is flawed and was improperly procured, but we must express profound concern that the Ministry of Finance has terribly discriminated against US investors.  Last January, AIB – already controlled by the Irish Government – excluded US investors from its bond tender offer rather than comply with US securities regulations.  These are the same US securities regulations with which Anglo Irish Bank complied in its successful tender offer a month earlier, when we and other US investors tendered a large portion of the bonds.  Unsurprisingly, the Ministry's decision to allow AIB to side-step the US securities laws resulted in AIB's January tender offer being far less successful (but still generating about euro 1.5 billion of capital for AIB).  When procuring the SLO, the Ministry misled the Irish High Court by blaming bondholders for the January tender's disappointing outcome without disclosing to the Court that AIB had prohibited US investors from tendering.  Only now, when seeking bond tenders at far lower prices, is AIB complying with US securities laws.

"The SLO represents a cure that is far worse than the disease.  Resorting to the SLO rather than a commercial restructuring would save only a miniscule percentage of the amount needed to recapitalize one bank, AIB, yet it would chill foreign investment in Ireland for years to come.  Any prudent investor would be bound to ask, if Ireland would so readily run roughshod over AIB's subordinated bondholders by a non-commercial fiat applied retroactively, how can I know the authorities will stop there?  And US investors would be bound to ask, if Ireland can target US investors for shabby treatment in one case, why not another?

"There is still time for a constructive resolution to be reached without setting a precedent that would do lasting damage to Ireland.  We deeply sympathize with Ireland for the adversity it faces.  We respectfully submit, however, that Ireland would be better served if its leaders overcome that adversity with grace than without it."

SOURCE Aurelius Capital Management, LP