UK investors in BoI to get double previous cash offer
Published 25/08/2011 | 05:00
SMALL UK investors in Bank of Ireland (BoI), who got the bank to abandon an effort to buy back their £75m (€86m) of debt earlier in the summer, were yesterday rewarded with a new cash offer for twice the original amount.
The fresh tender comes as BoI tackles some €600m of junior debt left over after the summer's €2bn blitz of debt buybacks and debt for equity swaps.
BoI bosses are also gearing up for a debt roadshow over the coming weeks to explore the potential for issuing bonds -- and the bank is actively working to restore short-term credit lines closed off over the crisis.
The terms of yesterday's tenders mean bondholders can exchange bonds with a face value of £100 for a basic price of £40, plus £5.20 of interest that's due on the instruments.
Earlier in the summer, the bondholders were offered a cash price of £20 for every £100 in bonds. Bondholders also had the option of £40 worth of shares, but only if they held bonds with a face value of more than $100,000.
Small shareholders deemed the offer prejudicial and began legal action in London, prompting the bank to abandon its offer in late June.
Yesterday's offer means small bondholders can get the cash equivalent of what they would have gotten had they been eligible for shares. The price is marginally ahead of the £44.50 the bonds are trading at in the market, implying a likely high take-up on September 22.
The offer is voluntary. Bondholders that don't accept it will have the same status as some bondholders holding about €500m across six bonds that were the subject of offers earlier in the year.
The Government is empowered to force losses on those bondholders, under the terms of emergency legislation brought in to stabilise the banks.
BoI has said it hopes to raise €500m in further capital by the end of the year. Yesterday's offer will generate a maximum of £45m, suggesting action on the remaining junior debt is likely.
Meanwhile, BoI bosses are preparing to go on a debt roadshow over the coming weeks with a view to raising secured funding from market sources by the end of the year.
The bank has been recapitalised to the tune of some €4.8bn and has the endorsement of new strategic shareholders including Capita and Fidelity, improving its case for market funding.
Yesterday, BoI also formally announced an extraordinary general meeting to seek shareholder approval for the new investors to be released from stock market obligations to make a full bid for the company.
The obligation arises because the quintet, which spent €1.05bn on a 35pc stake in the bank, were deemed to be "acting in consort" when they struck their buy-in deal with the Department of Finance .
They will be acting independently in all future dealings and don't require regulatory approval.