Allied Irish - Welcome to Hasbeenville

Well, another one bites the dust.  AIB will be 93% owned by the government in the coming days.  With equity essentially dead on the vine, it will be interesting to see how this "trickles up" the capital structure.  One of my worst value (trap) bets of 2010, as I thought they might be able to raise the required capital and stay quasi-independent.  Bad call Mike.

(Reuters) Ireland's government said on Thursday it would pump 3.7 billion euros into Allied Irish Banks (AIB) setting it on course for nearly 93 percent ownership of what was once the country's largest publicly traded lender.

AIB will be required to raise a further 6.1 billion euros ($8.01 billion) of core Tier 1 capital before the end of February to get its capital ratio up to 14 percent, under the terms of Ireland's bailout from the European Union and the IMF.

AIB, a former stock market darling, will have to cancel its listing on the main Irish and British stock markets and will apply instead for a listing on the enterprise securities market of the Irish exchange to give shareholders access to a trading facility for their stock.

"This capital is essential to allow AIB to fulfill its role in supporting the Irish economy," Finance Minister Brian Lenihan said in a statement.

AIB's aggressive courtship of property developers proved its undoing when Ireland's real estate market bubble burst, triggering huge industry-wide losses that forced the government to seek an 85 billion-euro bailout from the EU and the IMF.

Shares in Allied Irish Banks dropped 19 percent to 32 euro cents following the announcement. The stock hit a peak of over 24 euros in 2007, when Ireland's property boom was at its height.

The government is using funds from the National Pension Reserve Fund (NPRF) to bulk up AIB's core Tier 1 capital ratio, a key measure of financial strength, to 8 percent ahead of a year-end deadline set by the central bank.

In return, the NPRF will get ordinary shares boosting its current 19 percent stake in the bank to nearly 50 percent.

The NPRF will also get convertible non-voting shares which will be converted into ordinary stock, giving it a near 93 percent holding, once AIB completes the sale of its Polish interests to Spain's Santander.