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Rating Action:

Moody's assigns B3(hyb) rating to Allied Irish Banks plc's high-trigger AT1 capital securities

09 Dec 2015

London, 09 December 2015 -- Moody's Investors Service has today assigned a B3(hyb) rating to the "high trigger" additional tier 1 (AT1) EUR500 million note issued by Allied Irish Banks, p.l.c. (AIB -- rated Baa3 LT Deposits/Ba1 Senior Unsecured Debt Positive, ba3 BCA) on 26 November 2015. This rating was initiated by Moody's and was not requested by the rated entity.

This perpetual non-cumulative AT1 security ranks junior to all liabilities of AIB and ranks senior to common shares. Coupons may be cancelled on a non-cumulative basis at the issuer's option and on a mandatory basis subject to the availability of distributable items and regulatory discretion. The principal of the security will be written-down if AIB's transitional Common Equity Tier 1 (CET1) ratio falls below 7% (at bank or Group level). The principal amount can be written-up at the sole discretion of the bank.

The rating for these AT1 securities was initiated by Moody's and was not requested by the rated entity. Whilst AIB is a participating issuer, subject to Moody's definition of participation as referring to the relationship that Moody's maintains with the rated entity, it did not engage in dialogue or exchange information with Moody's regarding this specific rating action for these securities.

Please see the report "Moody's Rates Allied Irish Banks plc's Additional Tier 1 Security at B3(hyb)", which will be published later today, for further details on the features of these instruments.

A list of the assigned ratings can be found at the end of this press release.

RATINGS RATIONALE

The B3(hyb) rating assigned to the security is based on multiple risks, including the likelihood of AIB's capital ratio reaching the conversion trigger, the likelihood of coupon suspension on a non-cumulative basis and the probability of a bank-wide failure and loss severity, if any or all these events occur. Moody's assesses the probability of a trigger breach using an approach that is model-based, incorporating the bank's creditworthiness, its most recent CET1 ratio and qualitative considerations, particularly with regard to how the bank may manage its CET1 ratio on a forward-looking basis. Moody's rates these notes to the lower of the model-based outcome and AIB's non-viability security rating, which also captures the risk of coupon suspension on a non-cumulative basis. Moody's approach to rating high-trigger contingent capital securities is described in its "Banks" rating methodology, published on 16 March 2015.

AIB has a Baseline Credit Assessment (BCA) of ba3, which incorporates the bank's overall intrinsic credit strength and the most recently published group level transitional CET1 ratio, which was 18.2% at end-3Q2015. AIB's BCA, its group-level transitional CET1 ratio and some forward-looking assumptions on its regulatory ratio, in particular following the announcement of the proposed capital actions approved by the Single Supervisory Mechanism on 6 November, were used as inputs to the model, which corresponds to an output of B1(hyb).

The model output was then compared to the issuer's non-viability security rating, B3(hyb), which is positioned based on Moody's Advanced Loss Given Failure (LGF) analysis and also captures both the probability of impairment associated with non-cumulative coupon suspension as well as the probability of a bank failure. The 'high trigger' security rating is constrained by the rating on the non-viability security, leading to the assignment of a B3(hyb) rating to AIB's 'high trigger' AT1 securities.

In addition, Moody's ran a model sensitivity analysis on AIB that factors in changes to the group and bank's CET1 ratio. The outcome of this sensitivity analysis confirms that a B3(hyb) rating is resilient under the main plausible scenarios.

WHAT COULD CHANGE THE RATING UP/DOWN

The rating of AIB's AT1 notes is currently constrained by the rating on the issuer's non-viability security, which in turn could be upgraded if AIB's ba3 BCA were to increase.

Conversely, downward pressure on the rating of this instrument could develop if AIB' BCA was adjusted downward or if its transitional CET1 ratio were to decline substantially on a sustained basis. In addition, Moody's would also reconsider the rating in the event of an increased probability of a coupon suspension.

Assignments:

..Issuer: Allied Irish Banks, p.l.c.

Pref. Stock Non-Cumulative, Assigned B3(hyb)

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was Banks published in March 2015. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

This rating was not initiated or not maintained at the request of the rated entity.

Moody's considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody's. On this basis, the rated entity or its agent(s) is considered to be a participating entity. The rated entity or its agent(s) generally provides Moody's with information for the purposes of its ratings process.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Dany Castiglione
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Nicholas Hill
Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's assigns B3(hyb) rating to Allied Irish Banks plc's high-trigger AT1 capital securities
No Related Data.
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