LONDON - The Irish government gained court approval Thursday to nationalize Allied Irish Banks, the fourth bank taken over by Ireland amid a financial crisis brought on by speculative real estate lending.
The government, through the National Pension Reserve Fund, is immediately injecting euro3.7 billion (US$4.85 billion) into the bank and will initially get a 49.9 per cent share of the AIB's ordinary share capital. Following the conversion of nonvoting shares already held by the government, taxpayers will own 92.8 per cent of the bank, Ireland's Department of Finance said in a statement.
"This capital is essential to allow AIB to fulfill its role in supporting the Irish economy," said Finance Minister Brian Lenihan.
The court also ordered Allied Irish Banks to delist its shares on the Irish Stock Exchange and the London Stock Exchange.
The cash injection is Ireland's latest attempt to deal with its massive banking and financial crises -- the government already controls Anglo Irish Bank, and the Irish Nationwide and EBS building societies.
The Irish government plans spending cuts of euro4 billion (US$5.24 billion) and new taxes of euro2 billion (US$2.62 billion) next year, conditions it agreed to as part of a bailout deal to borrow up to euro67.5 billion (US$90 billion) from the European Union and the International Monetary Fund.
Thursday's ruling by the High Court in Dublin came two days after the European Commission approved the plan to bolster AIB's balance sheet to meet higher capitalization requirements. The EU commission also said the Irish government could inject up to euro6.1 billion (US$8 billion) into AIB next year.
The European Commission approved the capital injection for AIB on Tuesday, along with recapitalization of up to euro4.95 billion for Anglo Irish Bank and euro2.7 billion for Irish Nationwide Building Society.
Under the court-approved plan, AIB will issue 675 million ordinary shares at euro0.32 ($.42) each to the pension fund, 10.5 billion convertible non-voting shares and euro52.5 million to cancel warrants related to a 2009 recapitalization.
The nonvoting shares were being issued to help finalize AIB's euro3.1 billion (US$4.06 billion) sale of its 70 per cent stake in Poland's Bank Zachodni WBK to Banco Santander. Once that is done, the nonvoting shares will be converted to ordinary shares, the Department of Finance said.
