Friday 22 September 2017

BoI investors 'will have to take a hit' in new debt-for-equity swap

Laura Noonan

Laura Noonan

BANK of Ireland investors are likely to be asked to take a "significant" discount on the market prices of their bonds under the terms of the bank's upcoming debt-for-equity swap, the Irish Independent has learned.

The news came as BoI's shares last night closed at their lowest price since March 2009, valuing the bank at less than €960m -- about half what it was worth at the start of the year.

The Richie Boucher-led bank is battling to raise €4.2bn by the end of July, so the plc can avoid taking a massive injection from the taxpayer and handing over majority control to the State.

Almost two months after the capital demand was first unveiled by the Central Bank, BoI is now close to finalising plans to raise capital from private investors.

The first plank of the plan will be unveiled over the coming days, when BoI formally tells the market it is planning a so-called 'debt-for-equity exchange'.

The announcement is expected to be brief and will not include the terms of the exchange, which will only be revealed in a subsequent announcement.

A spokesman for the bank declined to comment last night.

Prices

The Irish Independent understands, however, that the terms are likely to be "pretty penal", with investors asked to take a "significant" discount on current market prices.

The junior bonds are trading at about 55pc of their face value, after rising marginally yesterday on hopes of a favourable debt-for-equity swap.

Fixed income specialists Glas recently said BoI's exchange could offer investors as little as €20 worth of shares for every bond with a face value of €100.

A recent debt buyback from AIB forced losses of between 75pc and 90pc on bondholders, terms described as the "minimum acceptable" by Finance Minister Michael Noonan.

BoI has been in discussions with the Department of Finance over the terms of its offer for several weeks, and could submit final proposals as early as today.

The Government is likely to threaten to force even bigger losses on investors who don't take up BoI's voluntary debt-for-equity swap, as happened with AIB's tender.

BoI is also likely to attempt to raise further capital through a rights issue that would give existing shareholders the opportunity to invest, as well as a private placement targeting new investors.

In a recent earnings statement, BoI said it would unveil its capital raising strategy "in a couple of weeks". The bank is 36pc owned by the State, which will fill any capital hole not plugged by market investors.

(Additional reporting: Bloomberg)

Irish Independent

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