THE management at Anglo Irish Bank, whose value has plunged from €8 billion in July 2007 to €280m, is trying to head off a possible nationalisation following the collapse of its share price.

David Drumm, the chief executive, has told employees that senior executives are working on a plan to recapitalise the bank.

Drumm gave no details, but it is likely to involve institutional shareholders and wealthy individuals, including existing shareholders, pumping hundreds of millions or euros into the bank.

It has been reported that the Anglo management sought government assistance to “underwrite” the fundraising from these investors, effectively asking the state to buy any outstanding shares that investors did not take up. The request is said to have been refused.

Without fresh capital from private sources, the state may be forced to take over Anglo in order to prevent a triggering of the taxpayers’ €480 billion guarantee of the banking system.

Anglo’s fight for independence will rest on its ability to show the stock market that it can raise more capital. The bank was hoping to conclude a fundraising from international institutions by the middle of January, but its plans have been altered by the stock market reaction to its annual results, released 11 days ago.

The market has punished Anglo for what it perceives as a failure to make adequate provision for bad loans, sending the shares down 60%.

Janus, a 7% shareholder, is one of the investors selling stock, contributing to the heavy falls in price incurred last week.

The market now believes that the business bank will have to raise even more money than originally thought.

There are concerns that the falling Anglo share price will start to affect the bank’s business, even though its deposit base is guaranteed by the state. This could, in turn, affect other Irish banks, leading to a return to the market panic that led to the state guarantee being put in place two months ago.

The state’s preference is for a privately funded and government co-ordinated approach to the recapitalisation of all ofthe Irish banks, banking sources believe.

The National Treasury Management Agency and the Department of Finance have been in contact with Bank of Ireland and Allied Irish Banks to float the possibility of a merger with a recapitalised Anglo Irish Bank.

An outright takeover has been ruled out. However, the banks might look at a management contract, which would lead to one of the banks running Anglo on behalf of the state.

Some of Ireland’s most powerful business people are shareholders in the bank and have been vocal supporters of its management, including Drumm and Sean FitzPatrick, its chairman. Sean Quinn and his family are reputed to own 15%, but the precise size of this holding has never been publicly revealed.

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