S&P lowers Allied Irish Banks hybrids

Standard & Poor's said it lowered its ratings on deferrable capital instruments issued by Allied Irish Banks plc (A/CreditWatch negative/A-1) to CC from B following the bank's announcement that, at the request of the European Commission, it is deferring all coupon payments that it is not legally obliged to pay.

The securities downgraded include the bank's €200 million variable/fixed-rate subordinated perpetual hybrid notes due 2049, €500 million step-up callable perpetual hybrid instruments and £400 million variable-rate perpetual callable subordinated upper tier 2 hybrid notes.

Also affected are AIB UK 1 LP's €1 billion variable-rate non-cumulative perpetual callable preferred securities, AIB UK 2 LP's €500 million fixed/floating-rate junior subordinated non-cumulative perpetual callable preferreds and AIB UK 3 LP's £350 million fixed/floating-rate junior subordinated non-cumulative perpetual callable preferreds. These securities are guaranteed by Allied Irish Banks.

The agency noted that once the coupon dates are passed, the securities will be further lowered to C.

Allied Irish Banks and the Irish Ministry of Finance are in discussions with the European Commission regarding resuming coupons on its deferrable instruments. S&P currently anticipates that these discussions have a low probability of being resolved before the next coupon dates.

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