Tuesday 6 December 2016

Noonan backs off from BoI bondholders as bank raises €350m

banks

Siobhan Creaton

Published 03/12/2011 | 05:00

THE Government will not be using emergency powers to 'burn' junior bondholders who are owed money by Bank of Ireland. Finance Minister Michael Noonan said he was no longer considering this option after the bank had raised €350m in new capital.

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Just last week Mr Noonan warned he was examining wiping out the value of some junior bonds to ensure Bank of Ireland raised the money it needed by the end of this year.

"As a result of the bank's announcement this morning, the minister is no longer considering the use of the powers available under CISA (Credit Institutions Stabilisation Act) for these purposes at this time," the Finance Department said in a statement.

The comments came as Bank of Ireland said it had met its fundraising targets having completed a deal that saw it buy back €1.5bn of residential mortgage securities at a hefty discount. The bank said yesterday it paid between 33pc and 92pc of the bond's face value for the securities.

BoI shares strengthened on the news, rising 6pc to close at almost 9c each. Analysts welcomed the deal. NCB Stockbrokers issues a 'buy' tag on the stock. Analyst Karl Goggin said the fact that the bank has been able to "manufacture a solution" that has allowed it to address the potential capital shortfall is a delicate solution to a complex situation.

Last March the bank was ordered to raise another €4.2bn to strengthen its balance sheet against future property-related loan losses after a series of stringent stress tests.

Up until this latest deal, the bank has generated €3.85bn of the funds it needed by imposing losses on junior bondholders. It also received €1.1bn from a group of US investors, that included financier Wilbur Ross, when they took a 35pc stake in the bank earlier this year.

The €1.1bn of securities it bought back yesterday were purchased from Kildare Securities Ltd and Brunel Residential Mortgage Securitisation, an increase of €150m on its original target.

Irish Independent

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