AIB has raised almost $250 million (£177 million) through the issue of 250,000 American depositary shares at an offer price of $995.16 per share. The proceeds will be used to redeem the 1989 $180 million non-cumulative preference share issue on June 4th.

The bank will save between £5 million and £6 million a year in servicing costs from the switch, according to a spokesman. It is now paying 10.68 per cent on the preference shares and this would rise to 11.85 per cent next year as the Irish legislation on tax credits changes. The bank, the spokesman said, would have had to compensate the holders of the shares for the changes.

The holders of the depositary shares will receive a dividend at London Interbank Offered Rate (LIBOR) plus 0.875 per cent, prior to July 15th, 2008, or around 6.6 per cent. This rises to LIBOR plus 1.875 per cent thereafter.

There was a very strong demand from US institutional investors for the depositary shares, the spokesman said, and the bank decided to take up more than it required. The proceeds, after the redemption, will be used to increase its capital ratios. AIB noted that as the issue "represented 250,000 non-cumulative preference shares, floating rate series A", it will qualify as Tier 1 capital under Central Bank regulations.

AIB has an option to redeem the shares at £1,000 per share on or after July 15th, 2008, provided the Central Bank gives its consent.