Business Irish

Sunday 4 December 2016

BoI raises €2.9bn as lender battles to avoid state control

Banking

Published 23/07/2011 | 05:00

BANK of Ireland (BoI) yesterday raised €2.9bn in fresh short-term funding, believed to be from Royal Bank of Scotland (RBS), as the bank fights to stay out of state control.

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In a statement, the bank said it had raised the funds through two "bilateral secured term funding" trades; one yesterday and one at the end of June.

The latest trade is believed to have been done with RBS -- itself nationalised by the British government in 2009.

The funding, which is not covered by the banking guarantee, has an average duration of some 2.2 years.

Although the lender would not comment on all the specifics of the fundraising, they did reveal that under the funding agreement's terms, they will pay 2.65pc above the three-month Euribor rate. The standard rate for European banks to lend to each other, three-month Euribor stood at 1.82pc yesterday.

"These trades were executed amidst a volatile market backdrop and are in line with the group's commitments under its deleveraging plan," said the lender.

"They demonstrate the strong quality of the assets on our balance sheet and the strength of our international relationships.

"The bank anticipates executing further secured trades later this year," it added.

BoI is facing a race against time to avoid joining the rest of the Irish banking sector under state ownership.

After the results of the stress tests in April, it was told it had until the end of June to raise €5.2bn if it wanted to remain under private ownership.

That deadline was pushed back to the end of this month with the firm trying desperately to raise the required funds.

It is already running a debt buyback scheme aimed at raising just under €2bn from junior bondholders. Last month it said it had secured support for the plan from 72pc of the affected bondholders.

Losses

It is also running a rights issue underwritten by the Government at 10c a share, the scale of which will be determined by the results from the debt buyback.

Separately, Irish Life & Permanent yesterday said it would impose losses of up to 80pc on four additional juniors bonds with an outstanding value of €80m.

Irish Life is hoping to raise around €1bn from imposing losses on junior bondholders to help it plug a capital hole of €4bn after stress tests in March.

The Government is expected to effectively nationalise the group through a court order in the next few days to inject the bulk of the capital required after shareholders rejected the State's proposals earlier this week.

Irish Independent

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