DUBLIN, Oct 1 (Reuters) - Fitch downgraded Allied Irish Banks' lower tier 2 subordinated debt to sub-investment grade on Friday after the Irish government signalled it would renege on agreements with subordinated bondholders in two other lenders.
Ireland's government said on Thursday it expected holders of subordinated debt in Anglo Irish Bank and Irish Nationwide to make 'a significant contribution' towards meeting the cost of a bill of up to 40 billion euros to clean up years of reckless lending.
Overall, the bill for sorting out the banking legacy of the 'Celtic Tiger' economy could top 50 billion euros, representing nearly a third of the country's annual economic output.
Ireland also said it would take a majority stake in Allied Irish Banks after the financial regulator said the lender needed 3 billion euros in additional capital by the end of the year, on top of 7.4 billion euros already sought.
The government did not signal it would restructure 4.1 billion euros in AIB subordinated debt but Fitch said there was an outside chance that if AIB required further capital then subordinated bondholders may have to take a hit.
'Fitch considers the risk to be remote, but still sufficiently tangible for the rating to be placed at sub-investment grade,' the agency said in a statement.
Fitch downgraded AIB's dated subordinated debt to 'BB' from 'BBB+' and also cut Anglo Irish's dated subordinated debt to 'C' from 'CCC' and Irish Nationwide's dated subordinated paper to 'C' from 'B+.'
Earlier on Friday, an investment vehicle of Russian billionaire Roman Abramovich said it may take legal action against Ireland over its decision to restructure Irish Nationwide's subordinated debt.
(Reporting by Carmel Crimmins; Editing by Diane Craft) Keywords: IRELAND/ALLIEDIRISH (carmel.crimmins@reuters.com; Reuters Messaging: carmel.crimmins.reuters.com@reuters.net; +353 1 500 1529) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Ireland's government said on Thursday it expected holders of subordinated debt in Anglo Irish Bank and Irish Nationwide to make 'a significant contribution' towards meeting the cost of a bill of up to 40 billion euros to clean up years of reckless lending.
Overall, the bill for sorting out the banking legacy of the 'Celtic Tiger' economy could top 50 billion euros, representing nearly a third of the country's annual economic output.
Ireland also said it would take a majority stake in Allied Irish Banks after the financial regulator said the lender needed 3 billion euros in additional capital by the end of the year, on top of 7.4 billion euros already sought.
The government did not signal it would restructure 4.1 billion euros in AIB subordinated debt but Fitch said there was an outside chance that if AIB required further capital then subordinated bondholders may have to take a hit.
'Fitch considers the risk to be remote, but still sufficiently tangible for the rating to be placed at sub-investment grade,' the agency said in a statement.
Fitch downgraded AIB's dated subordinated debt to 'BB' from 'BBB+' and also cut Anglo Irish's dated subordinated debt to 'C' from 'CCC' and Irish Nationwide's dated subordinated paper to 'C' from 'B+.'
Earlier on Friday, an investment vehicle of Russian billionaire Roman Abramovich said it may take legal action against Ireland over its decision to restructure Irish Nationwide's subordinated debt.
(Reporting by Carmel Crimmins; Editing by Diane Craft) Keywords: IRELAND/ALLIEDIRISH (carmel.crimmins@reuters.com; Reuters Messaging: carmel.crimmins.reuters.com@reuters.net; +353 1 500 1529) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.