Ireland nationalises Allied Irish Banks, injects €3.7 bn

The Irish government secured a Dublin high court order Thursday allowing it to inject €3.7 billion into the Allied Irish Banks Plc (AIB), one of the nation's 'Big Four' commercial banks, effectively nationalising the troubled lender by raising its stake to a dominant 92.8-per cent by early next year.

The action was taken under the new Credit Institutions (Stabilisation) Act 2010, enforced earlier this week by the Irish president Mary McAleese.

The country's finance minister Brian Lenihan, in consultation with the governor of the central bank, applied to the high court for a 'direction order' allowing him to provide funding to AIB to meet the year-end regulatory capital requirement of 8 per cent core 1 tier ratio set by the central bank.

''The order allows the minister to provide capital so as to ensure AIB meets its year-end capital requirement as set by the central bank. This capital is essential to allow AIB to fulfil its role in supporting the Irish economy,'' Lenihan said in a government press release.

Under the arrangement, a sum of €3.7 billion will be transferred to AIB from the National Pensions Reserve Fund (NPRF) ''as soon as possible.''

In return, AIB will issue 675 million ordinary shares of €0.32 each, and nearly 10.5 billion convertible non-voting (CNV) shares of €0.32 each. Besides, AIB will pay €52.5 million for the cancellation of warrants related to the 2009 recapitalisation.