The Government will take majority ownership of Allied Irish Banks in its second bailout of the lender, Finance Minister Brian Lenihan said.
The bank will seek to raise €5.4bn in a stock offering. The National Pensions Reserve Fund Commission, which is guaranteeing the sale, may buy as much as €3.7bn of stock and convert €1.7bn of preference shares, the lender said in a statement today.
“In the current stressed market conditions, the bank is unlikely to be able to conduct a traditional privately underwritten transaction,” Lenihan said in a statement today.
“As a consequence of these actions it is likely that the state will hold a majority shareholding in AIB.”
The Government said today the cost of rescuing the country’s lenders may jump to as much as €50bn.
The rising cost of the bailouts prompted Standard & Poor’s to downgrade Ireland’s credit rating last month and has pushed up the country’s borrowing costs.
AIB Managing Director Colm Doherty and Chairman Dan O’Connor will both step down.
“The big surprise is the increased capital number for AIB,” said Sebastian Orsi, an analyst with Merrion Capital, the Dublin-based securities firm.
“The Government could end up with over 90pc of the group, subject to investor take-up of the planned stock sale to shareholders.”
The stock tumbled 20pc to 44 euro cents as of 8:50am in Dublin trading today. The new shares will be sold for 50 cents each, the lender said.
“This is very disappointing, particularly regarding Allied Irish,” said Ciaran Callaghan, an analyst with NCB Stockbrokers in Dublin. Overall, it’s quite worrying that banking costs continue to rise. ”
The Anglo bailout may cost the Government more than €35bn, Standard & Poor’s credit analyst Trevor Cullinan said this month.