AIB secures likely buyers for all of IPO stake

Investment banks and brokers working on AIB’s upcoming flotation have secured enough demand to cover the maximum 28.8 per cent stake the Government plans to sell in the coming weeks, according to market sources.

A spokesman for the Department of Finance said the fact that the order book has been covered is "in line with expectations and shows that there's good investor interest" in the deal.

Crucially, the initial orders fall within the range of between €3.90 to €4.90 per share that the Government announced as the expected initial public offering price range on Monday evening.

However, the ultimate success of the IPO, due to price around June 23rd, will depend on the extent to which the share sale has been oversubscribed and the type of investors it attracts. AIB’s chief executive Bernard Byrne has set his sights on mainly attracting fund managers with a long-term perspective, rather than hedge funds, who might be willing to pay more but would only have a short-term interest in the bank.

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The deal is being led by Deutsche Bank, Bank of America Merrill Lynch and Davy, with Goodbody Stockbrokers, JP Morgan, Goldman Sachs, Citigroup and UBS also on the team.

Shares plunged

Meanwhile, shares in AIB plunged by more than 28 per cent on the junior market in Dublin on Tuesday morning as investors digested the expected price range. By late trading, the drop had reduced, but shares were still almost 14 per cent lower at €5.60.

Many small, speculative investors had ignored repeated warnings from the Minister for Finance Michael Noonan in recent few years that AIB's stock – of which only 0.2 per cent remained tradable after the State seized the bank in 2010 – had been overvalued amid thin trading volumes.

While the shares spiked late last month at €9.20, the Department of Finance revealed on Monday that it sees €4.90 per share as the top of its likely IPO range. This implies a value of between €10.6 billion and €13.2 billion for the bank.

The overvaluation of AIB first emerged in August 2011 when investors ignored a surge in the number of shares in issuance as taxpayers pumped the final amount of a total €20.8 billion rescue of the bank during the crisis.

At one stage, the bank was notionally Europe’s fifth-largest bank by market value, at over €60 billion, even as it was posting record losses. That was equivalent to nearly the State’s entire €64 billion bill for saving the banking system during the crisis and the €67.5 billion international credit line the Government was forced to accept in 2010 .