BoI to raise €600m to help repay state rescue loans
Bank of Ireland could seek to raise between €500m and €600m from shareholders as early as next week, as part of a plan to repay state rescue loans.
The bank will raise the equity through a share placement, meaning the money gets committed by a group of shareholders rather than asking all investors to commit new cash, according to a report from the Reuters news agency.
The figure is higher than the €400m the bank is previously thought to have been seeking. The bank is known to be considering a range of options to raise enough cash to refinance €1.8bn so-called preference shares owed to the State.
There is no deadline to repay the preference shares, however, the bank is under pressure to redeem the debt because the amount owed will increase by 25pc if it has not been paid off by March next year, under the terms of the original bank bailout.
Bank of Ireland declined to comment on the details of the placement, but said the lender was considering a range of options.
An equity raising by Bank of Ireland has long been anticipated, however, analysts had tipped the bank to keep the amount below €400m, or around 5pc of the size of the bank. That's because any larger share issue would require shareholder approval, meaning a protracted process including a vote at an emergency general meeting.
However, a shareholder vote could be avoided using a markets structure known as a "cash box", according to Ciaran Callaghan, an analyst at Merrion Capital. "Ocado Supermarket carried out a similar transaction last year when it placed new shares with investors, but instead of receiving cash directly it acquired ownership of a company whose sole asset was an equivalent amount of cash," he said.
The structure would allow the bank to raise more than €400m but avoid a protracted rights issue process, he noted.
Shares closed up in Dublin at 27c each.