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BoI to offer junior debt holders just 20c in euro

BANK of Ireland's junior debt holders could be offered as little as 20pc of the face value of their bonds in an upcoming debt for equity exchange, fixed income specialists Glas Securities said yesterday.

The comments came the day after AIB offered investors holding €2.6bn worth of junior bonds, a deal that would give them between 10 and 25pc of the face value of their bonds, an offer described by Glas as "a little below what we expected".

The loss taken by the bondholders was described as "the minimum acceptable" by Finance Minister Michael Noonan, leading some to believe that he expects Bank of Ireland's junior debt holders to accept a similar hit.

Bank of Ireland also has about €2.6bn of junior debt, and is expected to offer bondholders a debt for equity swap as it battles to raise €4.1bn of equity capital by the end of July.

Yesterday Glas said it had "previously" expected BoI to offer its junior debt holders a price "in the 40s", implying they would get about 40pc of the face value of their bonds in new shares.

"We now suggest that this (the 40s) is unlikely and that prices are more likely to be in the 30s, with a real risk of 20s," Glas said.

Market sources, however, stressed that BoI's situation was "very different" to AIB's since bondholders would be offered BoI equity instead of cash, and would therefore be taking on share-price risk.

BoI is believed to have given almost no guidance to bondholders on what kind of pricing it has in mind, though an announcement is expected over the coming weeks.

Meanwhile, ratings agency Standard & Poors (S&P) yesterday downgraded AIB's junior debt to "D", the lowest rating given by the agency.

In its announcement, S&P said it considered this week's offer to be a "distressed exchange", pointing out that there was a "realistic possibility of government-enforced coercive burden-sharing" for investors who did not take up the offer.

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