Bank of Ireland backs down on buyback plan
Scheme is abandoned on eve of court case with promise of alternative offer in future
Published 29/06/2011 | 05:00
BANK of Ireland's controversial buyback of £75m (€83.5m) worth of "perpetual" debt is unlikely to happen before July's capital-raising deadline after the bank yesterday agreed to abandon its offer for the bonds.
BoI insisted it would make a fresh offer to buy the debt after its original tender was scrapped so the bank could consider "unique difficulties" that were highlighted by affected bondholders.
A legal action against the offer was due to kick off in a London court yesterday, after UK pensioner Albert Kempster protested at a deal that would have forced him to accept just 20p for bonds he bought for £1.
The pensioner would have had to take 20p in cash, rather than 40p worth of BoI shares, because his holding fell below the £110,000 threshold for taking up the "debt-for-equity" element of the offer.
A BoI spokesman yesterday rejected suggestions that the bank had abandoned the offer because it feared it would lose the case, insisting yesterday's move had been agreed to the "mutual satisfaction" of BOI and investors.
In a stock-market announcement, BoI stressed that it intended "to instigate a new offer" on the affected debt, but gave no timeline for making any such offer.
Sources said that the timing for the future offer was "up in the air". It is thought that the bank is unlikely to have completed the buyback by the end-of-July €5.35bn capital-raising deadline.
The bank is believed not to be overly concerned about the delay, since the £75m accounts for less than 1pc of the total target and BoI has already secured capital gains of about €2bn from other bondholders.
The original offer on the contested £75m bond was criticised for not giving investors enough time to act, since the bonds involved would have to be physically produced and presented to the bank.
Smaller investors, including 2,400 UK pensioners, also argued that they were being unfairly treated because they would not be allowed to exchange their debt for shares.
The new offer will give investors more time to produce their bond certificates, but sources said BoI was unlikely to be able to extend the equity element of the deal to smaller investors.
The £110,000 threshold is imposed by EU law designed to protect smaller investors, and would be difficult for the bank to circumvent.
BoI had already gotten acceptances from investors who held 12pc of the affected bonds -- these acceptances will now be returned.
The take-up contrasts sharply with the 74pc acceptance rate across BoI's overall bondholder pool.