Bank of Ireland is on track to secure over 90pc support for its €1.7bn rights issue, the largest in Irish corporate history, buoyed by the State's commitment to preserve its stake, according to market sources.
Still, BoI's shares and traded rights to participate in the huge deal fell yesterday, amid heavy volumes. Trading in both categories has been very volatile over the past two weeks against the backdrop of several factors, including the sheer size of the fundraising and market nervousness around the eurozone debt crisis.
"To say it hasn't been the easiest time to sell shares in an Irish bank is an understatement," said one senior trader. BoI's stock lost 4.7pc to 72c, while the so-called nil-paid rights dropped 3pc to 18.5c. "The shares are now trading at a 35pc discount to the European banking sector, which is trading on book value."
The National Pension Reserve Fund (NPRF) has committed €630m to maintain a 36pc stake as shareholders are offered the right to acquire three shares for every two held.
The remaining €1.1bn stock offering is underwritten by Credit Suisse, UBS, Deutsche Bank, Citi and Ireland's Davy. However, well-placed sources said there was growing optimism on the camps of the five brokerages that they would be left with a "rump" of less than €170m worth of shares.
The sources added that the underwriters had been getting a growing number of so-called "reverse inquiries" by large institutional investors expressing interest in taking up part of the "rump" in a placement after the rights issue is completed.
Investors have until 11am on Tuesday to subscribe and pay in full for the shares they are being offered. The results of the massive capital raising will be announced before the stock markets opens on Wednesday.
Market sources suggest that about 95pc of institutional investors, including those that participated in a €500m share placement in late April, are likely to follow their money in the rights issue.
Assessing the appetite among retail investors, who made up over 40pc of the shareholder base before the deal was launched, has been more difficult. But sources close to the process say that even a take-up as low as 60pc among this category would result in a 90pc overall take-up.
Bloxham Stockbrokers yesterday carried out an informal survey of its private clients, a class of high net-worth retail investor, suggested that approximately 90pc were taking up their rights.
But stockbrokers have also seen a huge volume of smaller investors sell their rights, or what are known as nil-paid rights, over the past few weeks. Many were selling off some of their rights to raise cash to subscribe for the remainder of their stock rights.