€3.7bn injection to seal 'nationalisation' of AIB
Published 23/12/2010 | 05:00
THE Government is expected to own well over 90pc of AIB by the end of today, but shares in the embattled bank are expected to continue trading for the immediate future.
Legal papers lodged last night show Finance Minister Brian Lenihan will ask the High Court to approve a €3.7bn injection into AIB later this morning. The application could be granted immediately if AIB consents, as it is expected to.
The move was enabled by the new Credit Institutions Stabilisation Bill, which allows the Finance Minister to inject money into banks without shareholder approval.
The terms of the injection were unclear last night, but the investment was likely to give the State more than 95pc of the bank, leaving AIB nationalised in all but name.
Sources last night dismissed speculation that shares in AIB would be suspended, as happened ahead of the Anglo nat-ionalisation in January 2009.
It is understood that AIB's stock will continue trading normally on the ISEQ in the short-term, though sources admit this situation may not be tenable in the longer term, given the size of the State's stake.
Keeping AIB on the ISEQ will become even more difficult at the end of February, when the bank will need billions more in state cash to meet higher capital rules.
The Department of Finance, which lodged papers with the High Court last night, is believed to be exploring ways to enable continued trading of the AIB shares outside of an ISEQ listing.
This could be done through a 'grey market' arrangement, where shares are traded without any listing, or by listing the bank on a non-ISEQ exchange.
The sweeping changes to the bank's ownership and control are understood to be complicated by several legal issues, including some linked to the almost-completed €3.1bn sale of Bank Zachodni to Santander.
These issues do not prohibit Mr Lenihan from ploughing €3.7bn into AIB today, but they may influence the shape the injection takes and the legal structure the bank adopts.
The effective nationalisation of AIB has been on the cards since Black Thursday on September 30, when the Central Bank raised AIB's year-end capital targets by €3bn.
Attention today will focus on the exact size of the State's stake in AIB, with expectations ranging from 92-97pc. The European Commission is keen to ensure that the Government doesn't "overpay" for its AIB stake, suggesting it could be difficult for the Government to buy new shares at an above-market rate.
At one point, AIB was set to issue new shares to the Government at 50c a piece -- this now looks unlikely since shares in the bank closed at 42c last night.
A lower buy-in price for the Government will mean it gets more shares for its investment, ultimately lowering the stake that remains in private hands.
Today's move will make AIB the second full-service bank to come under government control, following a path beaten by Anglo Irish Bank back in 2009.
Unlike Anglo, AIB will not be wound down and the Government ultimately hopes to be able to sell down its stake or sell off the bank complete.
The Government also controls on-the-block building society EBS and Irish Nationwide Building Society, which is ear-marked for wind-down.