BoI shares rise on rights issue hopes
Bank of Ireland shares soared 5.5pc yesterday in active trading as the market reacted to news that the group's €1.7bn rights issue is on track to receive over 90pc backing from shareholders.
The Irish Independent reported yesterday that the five brokers underwriting the deal, Credit Suisse, UBS, Deutsche Bank, Citi and Ireland's Davy, were likely to be left with a "rump" of less than €170m worth of shares to sell next week after the rights issue is completed. Shares in BoI ended the session at 76c, having fallen as low as 63c last month.
The bank is offering shareholders the right to subscribe to three new shares for every two held at 55c a piece, as part of a series of initiatives aimed at raising €3.56bn to bolster the bank's balance sheet. The State will end up with a 36pc stake at the end of the process.
About 40 million shares in BoI changed hands in active trading in Dublin yesterday. Some 31 million of the traded rights, or nil-paid rights, to subscribe for new shares were exchanged.
The value of the nil-paid rights, which indicate the intrinsic value of participating in the deal, rose 18pc to 20c. The National Pensions Reserve Fund has committed €630m to maintain the State's stake, with the remaining €1.1bn of the rights issue left open to the public market.
People following the transaction said that about 95pc of institutional investors were expected to take up their rights.
While there had been concern about retail investors, which make up about 40pc of the shareholder register, sources suggested that at least 80pc were expected to support the deal.
Dealers said the surge in activity yesterday came as shareholders eyed Tuesday's 11am deadline to subscribe for the new stock. "The bank holiday on Monday also focused minds," said one Dublin trader.
Market observers said that support in excess of 80pc for the rights issue would have been considered a good result, against the backdrop of turmoil in global markets as investors fretted about the eurozone debt crisis.
Traders said that a disappointing take-up of the rights would have had negative consequences for Allied Irish Banks when, as expected, it goes cap-in-hand to shareholders later in the year. AIB needs to raise €7.4bn to hit new regulatory capital targets.