BoI facing €115m fee on capital-raising plan
BANK of Ireland's €5.2bn capital raising will cost the institution as much as €115m -- even though a significant amount of the cash is likely to be injected by the State.
News of the sizeable fees emerged yesterday as Bank of Ireland released further details of a four-pronged strategy to raise €5.35bn by the end of July.
The announcement revealed for the first time details of the pricing 'rights issue', where existing investors will be offered new shares for 10c.
The news triggered a fall on the markets of as much as 22pc in Bank of Ireland's share price yesterday.
Up to €4.35bn could be raised from the rights issue, the bank said, but the final level wouldn't become clear until after a separate debt exchange had been completed.
Any shares not taken up by investors will be bought by the State, which is acting as underwriter.
A spokesman for the National Treasury Management Agency confirmed an underwriting fee would apply, but said the level had not yet been set.
Yesterday's announcement also gave the first insight into the terms for the Government's €1bn short-term loan to Bank of Ireland through a so-called "contingent convertible" facility.
Bank of Ireland will pay 10pc interest on the loan, which will run for a term of five years.
A spokesman for the Department of Finance confirmed that the same terms would be applied to AIB, EBS and Irish Life & Permanent, which will together take in €2bn in contingent convertible debt.
The third element of Bank of Ireland's plan, outlined earlier this week, will see the bank offer investors who hold €2.6bn of junior debt the opportunity to swap the bonds for equity or cash.
Analysts believe Bank of Ireland could raise as much as €2.25bn in equity from this element alone, since investors will be taking a hit of as much as 90pc if they cash out their bonds, or will be converting fully to equity if they stay.
The debt offer is expected to be formally launched next week, with a deadline for acceptance in late June/early July.
Those who reject it will be forced to accept cash of 1c for bonds with a face value of €1,000.
The last element of the capital-raising project is a 'private placement', where Bank of Ireland will offer blocks of new shares to investors.
Talks with potential investors are ongoing, but a deal isn't expected to be broached until after Bank of Ireland has completed its debt exchange and the private element of the rights issue.
Bank of Ireland is being advised by UBS, Davy, Credit Suisse and Deutsche Bank.