Deal may leave bank with Connaught stake
Published 10/08/2010 | 05:00
BANK of Ireland could become a shareholder in failing British social housing company Connaught under a debt-for-equity swap, analysts have said.
Shares in Connaught fell 27pc yesterday on fears about a possible debt-for-equity swap that would wipe out shareholders. The stock has fallen more than 97pc since a profit warning in June.
Reuters reported that the company is in talks with its creditors over a long-term financing deal after delivering a spate of profit warnings in recent months, but analysts believe a debt-for-equity swap is the most likely outcome.
"A rights issue is out of the question and a debt-for-equity swap is all that is left, but it's hard to know if that will even happen," an analyst was quoted as saying.
Bank of Ireland lent money to Connaught along with Royal Bank of Scotland and Lloyds. Barclays sold its loans to hedge funds for about a third of their face value last week.
Bank of Ireland declined to confirm or deny that it had a stake in Connaught. Paul Haines, a company spokesman, said he could not comment.
"We're still in discussions with the banks," Mr Haines said. "What the outcome will be, we don't know."
The stock has declined 97pc since June 24, the day before Connaught predicted earnings would be hurt by government cutbacks.