AIB says report it could repay Ireland up to 2 bln euros 'sensible'

* Ireland (Other OTC: IRLD - news) to start recouping bailout via preference shares

* AIB CEO reiterates debt issuance plans

* AIB says investors positive on Ireland (Adds analyst, details, background)

By Padraic Halpin

DUBLIN, Oct (HKSE: 3366-OL.HK - news) 30 (Reuters) - Allied Irish Banks (EUREX: 558453.EX - news) said a media report it could repay 1.5-2.0 billion euros ($1.7-2.2 billion) of government bailout funds seemed "sensible," and hoped talks would conclude in the coming weeks.

State-owned AIB is in discussions with European regulators about reorganising its capital structure, including how much it can repay the government from the 3.5 billion euros of preference shares it owns in the bank.

Dublin has pumped 21 billion euros into AIB since the 2008-9 financial crisis, the biggest bailout given to any Irish bank still trading, and has said it will recoup all of the money, starting with its preference shares.

"It (Other OTC: ITGL - news) is obviously subject to an agreement with the SSM (the EU's Single Supervisory Mechanism), people are talking in a range that seems sensible but I'm not going to comment on an actual number at this stage," AIB CEO Bernard Byrne told reporters when asked about a media report the bank could redeem 1.5-2.0 billion euros of Dublin's preference shares.

"Hopefully in the next number of weeks we should be able to get to a conclusion."

Ireland's finance minister said last month the government would recover 3-4 billion euros from AIB in the next 12 months through redemption of the preference shares, the maturing of 1.6 billion euros worth of state-owned contingent capital notes (CoCos) next July, and through dividends on its shares.

The remainder of the preference shares will convert to equity and the 99-percent state-owned bank has said it will seek to raise Lower Tier 2 (LT2) and Additional Tier 1 bonds (AT1) - types of debt - to maintain its capital levels.

Byrne said he could not give a range regarding the amount of debt the bank would raise, but reiterated it was "likely that there will be an LT2 and AT1 element to it."

Analysts at Cantor Fitzgerald estimated AIB could eventually raise up to 900 million euros of AT1, 1.2 billion in LT2 and that there would be "strong and long pent-up demand" for the paper.

If re-elected early next year, the government plans to sell a 25 percent stake in AIB on the stock market.

Byrne said investors the bank has met over the past 12-18 months see the country's second largest lender by assets as a good play on an economy that is set to be the fastest growing in Europe for a second successive year.

"The investment community is positive on Ireland and they can see very clearly the role that a bank like AIB with its market share plays in that economic recovery," Byrne said.

($1 = 0.9085 euros) (Additional reporting by Conor Humphries; Editing by Jason Neely and Mark Potter)