22.6.2011
By Simon Miller
Allied Irish Bank has effectively defaulted according to the International Swaps and Derivatives Association (ISDA).
Yesterday, ISDA's EMEA Credit Derivatives Determinations Committee determined that the troubled bank had a "credit event" on its debt, effectively defaulting despite the efforts of the Irish government to avoid this.
As a result of the "Failure to Pay" credit event, Credit Default Swaps will be activated on senior debt and subordinated bonds and follows the 13 June determination that a Restructuring event had occured at Allied Irish and that an auction may be held - which will no longer be held as a result of the credit event.
Although the decision was expected, pressure will now turn to the Bank of Ireland as the last non-nationalised Irish bank faces its own ISDA decision on its debt.
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