*Alpha Bank plans 3-for-10 rights issue at 8 euros a share
* Says it raises funds to buy back government preferred shares
ATHENS, Oct 17 (Reuters) - Greece's third-largest lender, Alpha Bank, said late on Friday it plans a rights issue of up to 986 million euros ($1.47 billion) to buy back preferred shares it sold to the government earlier this year.
The company's board will meet on Monday to decide on a proposal to issue three new shares for every ten held, at a price of 8 euros each, Alpha said in a statement.
"The exclusive use of the proceeds of the rights issue (is) for the full redemption of all 200 million registered, non-voting and redeemable preference shares, in paper form, which the bank issued to the Hellenic republic," the bank said.
Alpha received in January a capital injection of 950 million euros via the sale of preferred shares to the state, as part of a 28 billion euro government support scheme to keep Greece's economy adequately funded amid the international credit crunch.
All major Greek lenders, including the two biggest National Bank and EFG Eurobank, took part in the scheme, which was a combination of capital and liquidity injections as well as bank debt guarantees.
Alpha Bank is the first Greek lender to announce a buyback of government preferred shares.
Greek banks, which are not burdened by toxic debt, used just 12 billion euros of the government plan as of June 2009. Under its terms, banks were not allowed to pay cash dividends for 2008. The government also appointed a representative on bank's boards, invested with veto powers on payout policy and executive pay. (Reporting by Harry Papachristou; Editing by Alex Richardson)