Tuesday 24 April 2018

BoI package to leave the State with 35pc stake

Joe Brennan

BANK of Ireland, which is preparing to announce a €3.2bn-plus capital-raising as early as Monday, will not be able to set the price of its 'rights issue' for the next three weeks.

As previously reported by the Irish Independent, the deal will comprise four key elements.

These are: a rights issue; a debt-for-equity swap involving some of BoI's riskier bonds; a conversion of some of the State's €3.5bn of preference shares into ordinary stock; and the placement of up to €400m of shares to large investors.

It is understood that the timing of the pricing of the rights issue, preference share conversion and stock placement is complicated by the fact that the debt-for-equity swap deal must be concluded first.

While the bondholders are currently being lined up to participate in the equity-swap deal, the bank is obliged to leave this offer open for a few weeks to US bondholders.

The equity that will be generated from the debt-for-equity deal will be less than the €500m originally envisaged, as the value of the underlying bonds has moved up in recent weeks.

An extraordinary general meeting (EGM) is being pencilled in for mid-May to get shareholder approval for various aspects of the massive deal -- including the right to launch a placement of stock exceeding 5pc of its market capitalisation.


It is expected that the Government will end up with about a 35pc stake in BoI after the entire transaction. As well as converting preference shares, it will also participate in the rights issue as a 16pc shareholder.

It is also speculated that the Government will participate in the €400m share placement.

All told, it will be contributing between €1bn and €1.5bn to the transaction.

Shares in BoI have almost doubled in value since the start of last month. It jumped 5.7pc yesterday to close at €1.85 -- marking its highest point since last November.

Irish Independent

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