Thursday 22 August 2019

Bank of Ireland clears the way for 2016 dividend

BoI chief Richie Boucher
BoI chief Richie Boucher
Donal O'Donovan

Donal O'Donovan

Shares in Bank of Ireland rose yesterday after it announced a deal to repay debt that will move it closer to resuming dividend payments to shareholders.

Meanwhile AIB, which has further to go than Bank of Ireland in its return to normality following the bailout, will hold an extraordinary general meeting (EGM) on December 16 to vote through a planned capital reorganisation.

Bank of Ireland, the 14pc State-owned lender, said it plans to redeem €1.3bn of so-called preference shares, a form of debt, on January 4 next year. The debt carries an interest rate of 10.25pc, costing the bank around €300,000 a day or €113m a year. The debt was issued as part of the bank's bailout in 2009 and was originally owed to the Government.

However, the preference shares were sold to a group of private investors in December 2013 in a deal that allowed taxpayers to partially recoup the cost of rescuing Bank of Ireland before the lender was in a position to redeem the debt.

That investor group is understood to include US billionaire Wilbur Ross and his Canada based peer Prem Watsa, who were key Bank of Ireland shareholders at the time. Under the terms of the 2013 deal Bank of Ireland committed not to repay the debt before January 1 2016.

The bank said yesterday that it will pay the full €1.3bn face value to redeem the preference shares. Once it happens Bank of Ireland will be able to begin setting aside profits to funds devidend payouts to shareholders for the first time since 2008.

Bank of Ireland chief executive Richie Boucher, said the plan to repay the preference shares at the earliest possible date will benefit ordinary shareholders, and said it was a result of progress made at the bank, including its organic capital generation.

The new European Central Bank (ECB) supervisory arm has approved of the plan, Bank of Ireland said. Bank of Ireland shares rose on the back of the news up more than 3pc at one stage to hit a high for the day of 34.80 cents each.

AIB meanwhile said yesterday that it will hold an EGM on December 16 to vote through the elements of a comprehensive capital restructuring.

The results are a foregone conclusion after the Department of Finance, which controls 99.8pc of AIB shares, said agreement had been reached between the Minister for Finance and AIB in relation to the reorganisation.

The multi-stranded plan includes swapping some debt owed to the State for new shares in AIB, repaying some money to taxpayers with cash borrowed on the markets, and consolidating the total number of AIB shares by exchanging every 250 units of old stock for one new share.

The Department yesterday invited finance houses that have already been pre-selected for its panel of banking advisors to tender for work to advise the State in relation to AIB next year, when it plans to sell as much as 25pc of the bank's shares on the markets.

Irish Independent

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