AIB Shores Up Pension Fund With Loan Transfer
17 August 2012 (PLANSPONSOREurope.com) - Irish bank AIB has confirmed a recently agreed transfer of €1.1bn nominal of loans assets to the AIB pension fund as part of an on-going strategy to meet non-core deleveraging targets.
In a statement, the government bailed out bank said the transaction was completed on an “arms-length” basis with both the bank and trustees conducting independent valuations of the assets.
The statement adds the transaction facilitated the deleveraging of a substantial non-core portfolio and was executed at a “substantial” discount to par value. The bank said it is not disclosing the discount level but it was in line with the levels assumed as part of its Prudential Capital Assessment Review (PCAR) exercise in 2011.
AIB says the move will mean its early retirement programme can proceed, which in turn will deliver essential reductions to AIB’s cost base. This transaction assists in addressing the deficit in the pension fund. AIB adds it expects cost reductions of an excess of €200m per annum as a result of the severance scheme.
The transfer, which will take place over the coming months, brings AIB’s total net non-core deleveraging to date to €15.5bn which represents 76% of AIB’s Central Bank of Ireland's Prudential Liquidity Assessment Review (PLAR) deleveraging target of €20.5bn. Following the completion of the transaction the assets will be fully transferred from the AIB balance sheet.
The bank says it remains on course to complete the substantial majority of its total 2013 deleveraging targets by year-end 2012 and to achieve this target in line with PCAR capital requirements assumed under the March 2011 exercise.
This transaction has been approved by the board as well as the bank's deleveraging committee, which includes non-voting observers from the Department of Finance and the Central Bank. The bank has also consulted with The Pensions Board as part of the process.
The bank adds that trustees, based on the taking of extensive professional advice, have indicated that they satisfied that the asset acquisition (based on the terms and conditions negotiated) is in the best interests of all of scheme members.