NEW YORK, FEB. 24 -- Bank of New York Co. Inc. said today it won't back away from a $1.08 billion hostile takeover bid for Irving Bank Corp. despite Irving's decision to issue preferred stock to several private investors.

To bolster its takeover defenses and place stock in friendly hands, Irving announced Tuesday that 15 investors were issued $100.1 million of the cumulative convertible preferred stock.

Those owning the new shares would be given more voting rights than common stockholders, with each of the preferred shares carrying 1.471 votes. The new shares also contain covenants, which Irving admits "could adversely affect the ability to accomplish any acquisition" should they be breached.

For one thing, the covenants would require the merged bank to maintain relatively high levels of capital, according to Irving, and they would restrict the company's ability to issue new stock.

Bank of New York, which has been bidding for Irving since last fall, called the private stock placement "illegal and just another attempt to obstruct the regulatory approval process which is near completion."

The merger proposal needs approval from the Federal Reserve Board, the New York State Banking Board and shareholders from both banks. The bid was on the Fed's agenda at a closed meeting late today, but Fed officials said there would be no immediate announcement about the results.

The banking board was scheduled to take up the proposal on Thursday.

Regardless of the outcome, neither bank would win, analysts predicted.

"If they {regulators} were to say it's not in the best interest of banking, then I think Bank of New York would probably walk away and Irving Bank's stock would fall substantially," said Stephen Berman, a banking analyst with County Securities USA.

"If they approved it, I think Bank of New York would persist but I still think it remains a very 'iffy' question."

Fed Chairman Alan Greenspan told the Senate Banking Committee today that he saw no distinction between hostile and friendly bank takeovers. Greenspan noted that any hostility in an unsolicited bid was between rival managers, not shareholders.

Hostile takeover efforts are rare in banking. A merger between New York Bank and Irving would create one of the nation's 15th largest bank holding companies with combined assets of more than $40 billion.

Owen Brady, a Bank of New York spokesman, said his company filed suit in New York State Supreme Court earlier this month after learning of Irving's plans to issue the new preferred stock. Brady said Bank of New York will now ask the court to decide quickly.

Irving had asked the same court to forbid the banking board from acting on the proposed merger, but the court ruled in favor of Bank of New York on Tuesday.

In a terse statement today, Bank of New York claimed that by issuing the preferred stock, "Irving has breached its fiduciary duties to common shareholders and is in violation of federal and state law."

Bank of New York also indicated it was considering a proxy battle for control of Irving's board. Should it succeed, it could undo Irving's "poison pill" antitakeover defense, intended to make any hostile buyout prohibitively expensive.