BoI setting aside up to €400m of shares for big investors
Bank of Ireland is set, as part of its herculean capital-raising plans, to offer up to €400m of stock to "quality" institutional investors not on its shareholder register, the Irish Independent has learned.
It would form a fourth element to what is shaping up to be the largest, and by far the most complicated, transaction in Irish corporate history -- aimed at raising about €3.2bn.
BoI is still waiting for Brussels' say on its restructuring plan, necessitated by its €3.5bn state bailout last year. This is expected imminently. It is understood group chief executive Richie Boucher and his advisers are on standby to launch a deal within weeks of the EU verdict.
The mammoth deal was already set to comprise a €1.5bn-plus rights issue, fully underwritten by four investment banks; a €500m debt-for-equity swap involving some of its riskier bonds; and a partial conversion of the Government's €3.5bn preference shares in BoI into ordinary stock.
The notion of a further amount being raised through a placement of shares with big funds, outside of existing shareholders, has gathered momentum in recent weeks.
Investment banks backing BoI, including Credit Suisse, UBS, Deutsche Bank and Citigroup, have reported what one senior market source described as "humongous" interest among investors internationally that had previously given Irish banks a wide berth.
The four brokerages are prepared to underwrite the stock placement. But it would still need to be approved at an extraordinary general meeting, as BoI only has authority from shareholders to place stock equivalent to 5pc of its market value.
Existing shareholders availing of the rights issue offer would see their holdings diluted significantly by the other three strands of the deal. Small shareholders make up 45pc of the shareholder register.
However, current shareholder will have a distinct advantage in that the rights issue will be set at a deeper discount to market prices than the other three parts of the transaction, sources said. Analysts expect the rights issue price to be set at a 40pc-50pc discount to where the stock is trading just before the deal is announced.
One source said: "The more money that can be raise in the private market, the less BoI will have to rely on state money."
The total deal is coming in higher than the €2.7bn signalled by Finance Minister Brian Lenihan two weeks ago in his watershed speech on the banking industry.
This is because BoI is looking to raise additional cash to buy out the Government's right to take a quarter stake in the group in four years' time. This would cost €450m-€500m based on current market prices.
Brussels has toughened its stance in recent months on Irish bank's restructuring plans, pressing BoI to agree to the sale of its UK business bank and broker-sourced mortgage book.
There are also concerns the EU may extract more pain as negotiations enter the final stretch. In this regard, the market's focus had centred on BoI's life and pensions business. BoI shares added 2pc yesterday to €1.67.