AIB issues warrants to State to avoid stocks embarrassment

Bank gives Government the option to buy back stake if its share price surges

 AIB flotation: the bank  has issued warrants to the State allowing it to buy back up to a 9.99 per cent stake. Photograph: Dara Mac Dónaill

AIB flotation: the bank has issued warrants to the State allowing it to buy back up to a 9.99 per cent stake. Photograph: Dara Mac Dónaill

 

AIB, which returned to the main stock markets in Dublin and London last month for the first time since 2010, has issued warrants to the State, allowing it to buy back up to a 9.99 per cent stake in the bank if it doubles in value over the next decade.

The terms of the warrants transaction, originally announced in April, are designed to avoid the State being embarrassed in the event of a massive surge in AIB’s share price.

The move follows the sale of an initial 28.8 per cent stake in the bank in June and acknowledges the likelihood of further placements in the coming years.

The warrants were issued on Tuesday and are exercisable between the first anniversary and 10th anniversary of the bank’s stock-market flotation.

However, the potential stake could be diluted from 9.9 per cent if AIB sells new shares in itself to stock-market investors in the meantime.

Bailout

AIB was seized by the then government in December 2010 as part of the bank’s €20.8 billion bailout during the financial crisis.

The sale of the 28.8 per cent stake has raised €3.4 billion.

The bank had previously returned €6.8 billion to the exchequer, including capital repayments, interest and guarantee fees.