A bird in the hand

6 October 2010 By Nicholas Paisner

The Irish bank is selling its 22 pct stake in the U.S. lender in the market after a deal with Santander fell through. A sale to the Spanish bank could have raised a bit more cash. But judged against AIB s 5.4 bln euro governmentbacked fundraising, the difference is minimal.

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Allied Irish Banks said on Oct. 5 that it would sell its 22 percent stake in U.S. regional lender M&T Bank Corporation.

The offering will take the form of Contingent Mandatorily Exchangeable Notes. The notes will exchange into shares of M&T if AIB shareholders vote in favour of the disposal at an extraordinary general meeting to be held later in October.

AIB said in March that it would sell a number of businesses, including M&T, before the end of the year. Spanish bank Santander held talks with M&T about a merger with its U.S. operation, Sovereign. As part of any deal, Santander would have acquired AIB's stake in M&T.

The Irish Financial Services Regulatory Authority raised its estimate of AIB's capital requirements on Sept. 30. It said that the bank would need additional equity of 10.4 billion euros, compared to an earlier assessment of 7.4 billion euros. AIB said it would raise 5.4 billion euros of new equity in a transaction underwritten by Ireland's National Pensions Reserve Fund Commission.

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