Bank of Ireland Rescue Will Hit Both Bond and Share Holders

It added that if bondholders fail to ante up in response to the offer, it will take other "severe measures" to compel them to help the bank recover its financial health. "In these circumstances, the bank believes the level of return to the holders of the outstanding eligible subordinated debt securities may be materially below that available … under the LME," the bank said.

One analyst, who asked not to be identified, said of the fall in the stock's price, "The price at which new shares are issued is 10 cents, and there will be a lot of new shares being issued at the time, so current shareholders are going to be diluted massively. Plus, if there is an equity exchange for the current debt, there is another dilution to come through, so that's the reaction, which is understandable."

The bank said the actual size of the issue would be between 1.76 and 2.22 billion euros, and would depend on how many shareholders opted to exchange their securities for shares rather than cash. It added that it would announce the size of the issue after completion of the LME tender offer.