Business Irish

Saturday 25 February 2017

Bank of Ireland plans to raise €3.4bn

Dara Doyle

Bank of Ireland HQ on Baggot Street, Dublin
Bank of Ireland HQ on Baggot Street, Dublin

Bank of Ireland Plc, the country’s biggest bank by market value, plans to raise as much as €3.4bn to bolster capital as real-estate losses surge.

The company aims to sell €500m in shares to a group of institutional investors and an additional €1.9bn of stock in a rights offer, the bank said in a statement today.

The bank also plans to convert some of the government’s preference shares into equity, raising €1.04bn. The state will retain a maximum stake of 36pc.

Bank of Ireland said its plan will help raise a total of €2.8bn after expenses and buying back state warrants.

“There may be some disappointment at the dilution, but it’s well anticipated and overall the transaction terms look attractive,” said Sebastian Orsi, an analyst at Merrion Capital in Dublin. “The money has been effectively raised now. I’d expect a good level of take-up of the rights.”

Bank of Ireland fell 8 cents, or 4.4pc, to €1.72 by 10:23 am in Dublin trading, giving the company a market value of €2bn.

The placement of stock with institutional investors and the conversion of government preference shares will be at a price of €1.53, or 15pc less than the April 23 closing price.

The government pumped €3.5bn into the bank last year to help keep it alive after Irish real-estate values fell by half on average. Lenihan set up a so-called bad bank, the National Asset Management Agency, to purge lenders of toxic loans.

The agency is buying debt with a book value of €80bn, about half the size of the Irish economy. In the first tranche of loans, NAMA is buying loans with a nominal value of €1.93bn loans from Bank of Ireland at a discount of about 36pc.

“Trading conditions in our core markets in Ireland and the UK in the first quarter of our 2010 financial year remain challenging though economic conditions have recently shown some signs of stabilisation,” Bank of Ireland said in a separate statement today.

The financial regulator is imposing higher capital requirements on lenders to help them withstand losses. Bank of Ireland said the fundraising will boost its equity tier one ratio, a measure of financial strength, to 8pc from 5.3pc at the end of last year.

“The target was for them to go to the market and raise money, so they’ve done that,” Lenihan said in an interview today. “It’s a sign of international confidence.”

The bank is being advised by IBI Corporate Finance and Credit Suisse Group AG, the statement shows. Credit Suisse, UBS AG, Deutsche Bank AG, Citigroup Inc. and Davy are acting as joint bookrunners and underwriters.

“The big news today is the placing of €500m of stock with institutions and demand for this will be a good barometer for the level of interest in Ireland Plc again by international investors,” said James Forbes, senior equity strategist at Irish Life Investment Managers in Dublin. “The company looks to have ticked all the boxes and is well down its re-capitalisation road.”

Bloomberg

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