The International Swaps and Derivatives Association (ISDA) has ruled that AIB's decision not to pay a coupon on a subordinated bond has triggered what it calls a 'failure to pay' credit event.
This means bondholders are likely to be able to get some money back under insurance measures known as credit default swaps (CDSs).
The decision overrides a previous announcement by ISDA that a restructuring event had taken place on June 9 when the bank suspended interest payments and extended the maturities of most of its outstanding debt ahead of a buyback.
A failure to pay credit event takes precedent and means in this case that subordinated bondholders will probably get more money back than they might have expected from the restructuring credit event.
At the time of the previous ISDA ruling, a spokesperson for the Department of Finance said the development was 'entirely anticipated' and had no implications for the State nor AIB, as the bank was not a party to the CDS contracts.
AIB has said it expects to generate €1.6 billion in capital from imposing losses on junior bondholders.
