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AIB - Betting against AIB Again
Short Screen members may recall we bought puts on AIB at the end of July, 2010, and sold them in October for a decent gain ( http://shortscreen.com... ). As I noted back in July when I bought those puts,
"Among the European banks that passed the stress test, AIB had one of the weakest sets of results. And bear in mind that these stress tests didn't test for the effects of a sovereign default (http://www.bloomberg.c... )"
AIB's situation has only gotten worse since, as Monday's Lex column on Ireland in the FT (Registration required, I think: http://www.ft.com/cms/... ). Excerpt:
"The end is approaching for non-government shareholders of Allied Irish Banks. The Irish government announced on December 23 that the National Pensions Reserve Fund Commission would inject €3.7bn into AIB, multiplying the state’s share of the equity fivefold to 93 per cent.
The price suggests the desperation of the situation..."
I picked up a few of the $1 strike, August 2011 puts on AIB today at $0.40.
Incidentally, I am still holding puts on one other European bank, NBG ( http://shortscreen.com... ).
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From the Sunday Business Post (Dublin) yesterday:
"AIB will be the first out of the Iseq [the Irish Stock Exchange Quotient; the composite index of all the stocks on the Irish Stock Exchange] in 2011, but its shares will still be traded for cosmetic purposes on a smaller platform.
The level of dilution to existing shareholders will be so great by the end of February, when the state pumps another €6 billion into the company, that it is effectively dead as a stock market entity."
Link to the rest of the article: http://www.sbpost.ie/t...
Bloomberg TV just reported that S&P downgraded Ireland. Now it has the same sovereign credit rating as Portugal.
Reuters reports that Moody's cut the credit rating on AIB's senior unsecured debt to Ba2 from Baa3 ( http://www.reuters.com... ). P.12 of this PDF breaks down what Moody's credit ratings mean: http://www.rbcpa.com/M...