DUBLIN, Jan 12 (Reuters) - Allied Irish Banks offered to buy back 3.9 billion euros ($5.1 billion) of subordinated debt at a 70 percent discount, broadly in line with secondary market levels, in a bid to cut its capital needs.
Allied Irish, effectively nationalised late last year after a 3.7 billion euro state capital injection, could generate just under a quarter of the 6.1 billion capital it still needs to raise, Davy Stockbrokers analyst Stephen Lyons said.
Bank of Ireland ran a similar exercise last month, getting a 45 percent take-up. A 50 percent take-up for AIB's offer would generate 1.37 billion euros of capital upfront, Lyons said on Thursday.
'Given the size of the 6.1 billion euro capital that the bank needs to generate by end-February, outstanding deleveraging and the stress tests on both asset quality and liquidity fear should influence a significant take-up,' Lyons said in a note.
'The outlook for state ownership -- mid to high 90 percent -- does not really change on the back of this announcement.'
AIB's offer may not have been as penal as some bondholders had feared after fellow state-run Anglo Irish Bank aggressively forced an 80 percent writedown on its subordinated creditors last month.
'Bondholders had feared a more coercive Anglo-style approach where they were given a very penal alternative. This is a voluntary exchange, albeit at a deep discount,' said Michael Cummins at Glas Securities.
(Reporting by Padraic Halpin; Editing by Dan Lalor)
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