Sunday 4 December 2016

Investors in Bank of Ireland face share dilution

Emmet Oliver and Patricia McDonagh

Published 22/02/2010 | 05:00

The main losers in the dilution will be retail investors who have piled into the bank's stock over the last 12 months. Photo: Bloomberg News
The main losers in the dilution will be retail investors who have piled into the bank's stock over the last 12 months. Photo: Bloomberg News

Bank of Ireland shares could come under pressure today as the markets absorb the implications of the Government taking a 16pc stake in the bank.

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All existing shareholders are now set to be diluted and further dilution will take place within weeks when a rights issue is scheduled to take place. The bank's shares in New York dropped by 0.5pc in late trading on Friday.

The main losers in the dilution will be retail investors who have piled into the bank's stock over the last 12 months. Other losers will be Irish institutional funds who have kept faith with the bank despite horrendous losses over the last two years.

Some of the bank's largest shareholders will now have the size of their stakes cut back. US fund Harris Associates, which owns an 8pc stake, will see its holding cut back to about 6.7pc.

The dilution arises because Bank of Ireland was forced to transfer €250m of ordinary shares to the NTMA last week, after the EU Commission halted certain cash payments on preference shares by distressed banks.

AIB will find itself in the same position in May when it's due to make a cash coupon payment to the NTMA. However the EU's so-called "coupon stopper" may have been lifted by then.

Bank of Ireland has to start moving loans into NAMA before any fundraising takes place. Its NAMA team have been carrying out valuation exercises over recent weeks.

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Yesterday the 'Sunday Times' reported that Irish Life Investment Managers, Eagle Star and Aviva are among a group of fund managers looking to invest €70m for a 60pc stake in the NAMA special purpose vehicle (SPV). This SPV will be the company exchanging NAMA bonds for the thousands of soured property loans that lie on bank balance sheets.

The EU has insisted that the private sector must control the SPV on a day-to-day basis.

Meanwhile, Fine Gael leader Enda Kenny said last week's Bank of Ireland decision was a "bad result for investors".

"I think there is a flaw here in the contract between the banks and the Government. Obviously they have been left with very little option because of the circumstances. This means a bad result for investors," he said.

Irish Independent

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