AIB HAS ANNOUNCED a new plan which could see its junior bondholders bear some of the bank’s debt burden and lose up to 90 per cent of their investment.

In a statement released yesterday, the bank said it plans to launch an “offer to buyback outstanding securities” at rates which are 75 per cent less than the bondholders initially paid – and 90 per cent less for subordinated bonds.

Minister for Finance Michael Noonan said that this was the “final market-based step to ensuring appropriate burden-sharing by subordinated bondholders” in the bank and the terms being offered by AIB were of the “minimum acceptable”.

“The proposed LME offers those investors the final opportunity of a market based exit at a return which is reasonable and fair considering the level of Government support to date,” Noonan said in a statement.

AIB says that two bondholders have launched a legal challenge to burden-sharing, which the High Court will hear on 2 June.

Noonan previously claimed the challenges were “entirely unfounded”. The Department of Finance said in a statement that the court ruling would “in way deter the government from achieving appropriate burden-sharing” levels with bank bondholders.