Business Irish

Tuesday 28 March 2017

Canadians lead group putting €1.1bn in Bank of Ireland stock

Wilbur Ross, famed for turning embattled companies into profitable firms, is also believed to be in the consortium

Shares in BoI were up 8.9pc at one stage on the news -- to 11 cents each -- but slipped back to a little over the 10 cent price already set for today's rights issue by the close of business. Photo: Getty Images
Shares in BoI were up 8.9pc at one stage on the news -- to 11 cents each -- but slipped back to a little over the 10 cent price already set for today's rights issue by the close of business. Photo: Getty Images

Donal O'Donovan and Laura Noonan

A STRATEGIC Canadian investor has emerged as the lead buyer in the consortium pumping €1.1bn into Bank of Ireland and keeping the lender out of state control.

Sources last night said that the Canadian group had met officials from the Central Bank "a couple of weeks ago" to discuss the investment and the overall situation facing the bank.

Wilbur Ross, the American investor who led a doomed bid for EBS, is also in the consortium, well-placed sources confirmed last night, though Mr Ross could not be reached for comment.

The identities of other investors making up the consortium of "eight or nine" remain shrouded in secrecy ahead of a formal announcement on Friday, but the Irish Independent has learned that there are no UK or Irish buyers.

The consortium's investment means the taxpayer will save €1.1bn, though some of the €1.9bn recapitalising cost is likely to still fall on the state after the results of the bank's rights issue become known today.

Under a deal signed with the government, the North American group replaces the state as the buyer of last resort for new shares being sold by the bank today in a "rights issue".

Shares in Bank of Ireland were up 8.9pc at one stage on the news -- to 11 cents each -- but slipped back to a little over the 10 cent price already set for today's rights issue by the close of business.

DEMAND

Market sources said the buyers fear the shares would be more in demand if their identities were disclosed, making it harder for the consortium to snap up shares.

Current shareholders were reluctant to subscribe for new shares when the banks looked sure to be nationalised, but seeing alternative bidders may fuel their appetite for risk.

People involved said the commitment from the new investors is backed by signed contracts.

Bank of Ireland is selling the new shares to raise cash to meet capital targets set by the Central Bank. The new shares are being offered to shareholders at 10 cent each, a slight discount to where they were trading ahead of the offer being announced. The new investors have been offered the shares at the same fixed price.

The government initially committed to buy any shares that shareholders did not want, leaving it on the hook for the full ¿1.9bn cost. Yesterday's deal means the new investors take on that commitment.

One of the bidders, Wilbur Ross, teamed up with Irish-owned Cardinal Investments and US-based Carlyle Capital to bid for the EBS earlier this year, but Carlyle and Cardinal are not involved in the new bid, the Irish Independent learned.

Mr Ross made his name by buying companies in trouble cheaply, turning them around and flipping them, targeting asset-rich firms in the coal and steel sectors, but the rest of the new buyers are understood to be more cautious investor types.

A source on Wall Street named Canada Pension Plan (CPP) IB -- a huge pension manager linked to the Canadian government -- among the buyers. A spokeswoman for CPP said the fund would not comment on the rumour.

The deal agreed with the government means the new investors will share at least 19pc and up to 37.3pc of Bank of Ireland.

The stake depends on whether investors that already own Bank of Ireland shares take up their right to buy new shares.

The government said it was not going to let its share in the bank fall below 15pc. The government is still going to invest ¿1bn in the bank in the form of slightly lower risk contingent capital, which pays interest of 10pc, as part of the recapitalisation.

The new investment means that at least 68pc of Bank of Ireland is certain to remain in private hands.

The new investors will initially buy 14pc of shares for €423m and are committed to spending another €700m if demand from current shareholders is low enough to leave that many shares available.

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