State will take 17pc stake in AIB instead of cash dividend
Published 29/04/2010 | 05:00
THE State is set to take a 16pc to 17pc stake in Allied Irish Banks (AIB) next month when the bank is forced to pay in shares instead of cash for a dividend that falls due.
Brussels has banned AIB from paying discretionary dividends or coupons while it is probing the bank's restructuring plan.
The bank is due on May 13 to pay an 8pc -- or €280m -- dividend on the State's €3.5bn of preference shares in the group.
Bank of Ireland faced a similar dilemma in February when it was forced to cede a 15.7pc stake to the National Pensions Reserve Fund (NPRF), which holds the stake for the State.
The ordinary shares AIB will be forced to issue the NPRF will be priced at the 30-day average before deal takes place.
The lower the average share price falls, the higher the stake AIB will have to hand over to the State.
AIB chairman Dan O'Connor said the bank continued to discuss its restructuring plan with the European Commission and that the bank did not yet have a date for the EU ruling.
Brussels has directed that rival Bank of Ireland sell off its New Ireland life and pensions business, as well as its Bank of Ireland Asset Management (BIAM) and ICS Building Society arms by the end of 2013.
Analysts fear that AIB faces similar pressure to dispose of AIB Investment Managers, its 24.99pc stake in life and pensions joint venture with Aviva, as well as its Goodbody Stockbrokers unit.
Meanwhile, Mr O'Connor defended the group's sale of an alleged Greek fraudster's £700m (€807m) property portfolio in London to developer Green Property.
AIB took control of the properties in 2008 and they were later sold to Green Property, which funded the transaction with AIB.
A shareholder yesterday accused the bank of "ware-housing" the portfolio -- including trophy assets such as the Telegraph building, and offices occupied by the UK home office and department of health -- via this transaction and avoiding a larger writedown than £56m (€64.5m) on its books.
Mr O'Connor confirmed that the Financial Regulator had asked questions relating to the deal. "We answered them all. It is a portfolio of very, very good assets in London and they were sold at arms-length," he said.
The chairman added that the deals had board approval and that "proper details were given to the auditors and financial regulator".
Achilleas Kallakis and associate, Alexander Williams, were charged at the City of London Magistrates' Court early last month in relation to the property loans received from AIB between 2002 and 2007.
Both men are scheduled to appear in court next Tuesday.
Answering questions on what he had learned from the banking crisis, AIB's managing director Colm Doherty said: "There was far too much money lent out to single property developers."
Mr Doherty, who took over the helm last November, said that one of the principle lessons was not to build up a lending concentration to "any one asset class" or to single individuals or companies.