AIB has announced an offer to buy back some of its subordinated debt at lower prices in order to strengthen its financial position.
The offer covers bonds issued in euro, dollars and sterling with a total nominal value of around €4.1 billion.
The bank is offering bondholders €300 in cash for every €1,000 of debt held, a discount of 70%. Similar offers are being made for sterling and dollar bonds.
AIB says the offer is aimed at strengthening its capital base by realising the value of the discount between its offer price and the initial value of the debt, and by reducing the interest to be paid on the debt. Subordinated bonds are usually given a higher rate of interest as they run more of a risk of not being re-paid.
Any money raised in the offer, which expires on January 21, will go towards the €6.1 billion the bank needs to raise by the end of February to meet targets set by the Central Bank. Most of this money is expected to come from the State, however.
The AIB scheme is voluntary, unlike a recent Anglo irish Bank plan which imposed losses on some bondholders.
In theory, if 100% of the AIB bondholders involved took up the offer, it would boost AIB's position by around €2.8 billion, but the take-up for such schemes is usually much lower.
