Investment banks eye €50m fees bonanza in BoI offering
Hard bargaining takes place ahead of mammoth share sale
International investment banks are vying for pole position as they seek to carve up over €50m of underwriting fees from Bank of Ireland's upcoming mammoth share sale.
It comes as top Department of Finance official, William Beausang, and senior BoI executive, Denis Donovan, led a delegation to Brussels last week for what was described as "hard bargaining", as talks on the group's state-aid restructuring plan entered the final stretch.
The outcome of the EU negotiations will pave the way for the bank's chief executive Richie Boucher to line up a €1.5bn-plus rights issue, as he seeks to raise €2.7bn of capital to bolster the group's balance sheet.
Analysts from Goodbody Stockbrokers see BoI hitting the market with a €1.9bn rights issue. They expect the bank to raise a further €800m by converting some of the Government's existing preference shares into ordinary stock, with €500m coming from a restructuring of the group's riskier -- or subordinated -- debt.
The Government took a 15.7pc stake in BoI in February as the bank was forced to accept shares in lieu of a €250m cash dividend due on its €3.5bn of preference shares in the group. This was down to an EU ban on BoI paying discretionary dividends as it probes the group's restructuring plan.
Meanwhile, corporate finance sources say there is "a lot of jockeying for position" among the four investment banks in the frame to underwrite -- or guarantee -- BoI's rights issue. It is expected to be launched later this month.
Credit Suisse, where investment banker Chris Williams is BoI's main outside adviser on capital issues, UBS, the group's broker, as well as Deutsche Bank and Citigroup are jostling to determine what portion of the rights issue each of them will underwrite. Underwriting fees are typically 3pc of a deal.
Bank of Ireland's IBI Corporate Finance has been retained, while Davy is poised to be a co-lead manager of the rights issue.
The role of a local stockbroker is heightened given that almost half of BoI's shares are in the hands of a disparate group of retail investors, who are key to the share sale succeeding.
Finance Minister Brian Lenihan said last Tuesday that he was "satisfied that there is the basis of agreement on the overall framework" for BoI's restructuring plan with EU Competition Commissioner Joaquin Almunia.
The next day, Mr Beausang, an assistant secretary at the Department of Finance, led a contingent to Brussels to fine tune the details. It is understood there will be at least one more meeting over the next few weeks on BoI's viability plan.
The Irish Independent reported two weeks ago that the EU was looking for BoI to agree to sell its UK business banking and broker-sourced mortgage book, as it looks to extract more pain from bailed-out lenders across Europe. BoI had already put this mortgage book into run-down mode early last year by closing it off to new business.