Allied Irish and rival Bank of Ireland have been buying back cheap debt to raise capital, which will be depleted in a €80bn “bad bank” exercise to start this month.
Allied Irish has previously said it would try to sell some of its overseas assets and/or a stake in the group to a strategic investor before launching a rights issue or asking for more state help.
“It’s one of a range of options they are using,” said Kevin McConnell, head of research at Bloxham Stockbrokers, adding the bond swap could raise €350m-€400m.
Allied Irish said it could not elaborate on its statement yesterday, but would announce the results of the offer on 22 March.
Earlier this month Allied Irish warned a third of its total loan book is at risk and said it needed more cash as it reported a €2.4bn operating loss against a profit of €862m a year earlier.
The bank took a €5.35bn charge against bad debts during the year. The bank’s managing director, Colm Doherty, has been considering all options to raise capital including selling off assets or business units, rights issues or a debt exchange.