Business Irish

Monday 5 December 2016

BOI changes sale strategy for ICS and New Ireland

State control could rise to 87.7pc

Published 09/06/2011 | 05:00

BANK of Ireland has axed plans to offload ICS Building Society and is pushing out the sale of life insurance arm New Ireland by another 12 months, it emerged last night.

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Details of the bank's "revised" business plan were revealed in a lengthy document setting out further detail on BOI's upcoming €5.35bn capital raising.

Other revelations in the document include:

•State control of BOI could rise to as much as 87.7pc if investors and bondholders shun the bank's capital raise

•BOI will have to delist from the 'main' ISEQ market and move to the 'junior' Enterprise Securities Market if the state's stake rises above 75pc

•BOI won't resume paying dividends until December 2015 or until it has repaid the State's preference shares

lBOI won't make any new acquisitions until it has repaid all state loans and investments

•Bondholders who exchange their debt for equity in the bank could be paid as little as €80 for bonds with a €1,000 face-value.

Yesterday's document comes more than two months after the Central Bank demanded BOI boost its capital by €5.2bn by the end of July so the bank can deal with possible future losses.

BOI is pursuing the €5.2bn target, plus an extra €150 to cover costs, by striking a deal with junior bondholders, selling new shares to existing investors (including the State) and taking a €1bn loan from the State.

Yesterday's document also stressed that BOI "continues to have active discussions with other sources of private capital."

Under the scenarios outlined by BOI, the State could end up owning as little as 26.6pc in the bank if BOI gets 100pc take-up of its €2.6bn debt for equity offer and its €1.77bn rights issue to existing investors.

The worst-case scenario would see the State end up with 87.7pc of BOI, if bondholders cash out and investors reject the rights issue, leaving the State to fill the remaining capital hole.

"The Bank has agreed . . . that in the event that less than 25pc of the Bank's issued capital is in public hands following completion of the proposals, the Bank will, on 31 July 2011, serve notice of its intention to cancel its listing on the Official Lists and to cancel its trading on the main markets of the Irish Stock Exchange and London Stock Exchange," the document added.

Outcome

The full outcome of the capital raising won't be known until July 26 -- other key dates are identified as June 3, when the "early participation results" for the offer will be announced, and July 8, when results of the bondholder deal are revealed.

The document also includes an update on BOI's strategy.

A business plan awaiting approval from Brussels revokes an earlier commitment to sell ICS Building Society, and pushes the sale of New Ireland out until the end of 2013.

The business plan provides for "restrictions on marketing spend" to be extended for another 12 months, while a restriction on acquisitions will run until December 2015 or until the state's investments have been repaid.

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