Bondholders hang on to their Bank of Ireland equity
MOST bondholders who got shares in Bank of Ireland as part of a €2bn debt-for-equity deal appear to be sticking with their investment, despite being allowed to sell off their shares for the first time yesterday.
Analysts had been expecting a 'buying opportunity' -- or sharp fall in the share's price -- when bondholders who own some 19pc of the bank came into their stock yesterday.
But BoI's shares actually closed up 2pc at 9.5c last night, suggesting that bondholders largely held on to their stock, even though some would have made a profit if they had sold for anything over 5 cent.
Yesterday's strong share-price performance came despite stockbroker's Davy's morning announcement that it was cutting its expectations for the bank's 2011 pre-provision profits by 35pc.
Analyst Emer Lang attributed the decision to higher costs for the government guarantee fee, lower income-earning assets and one-off costs of €110m in the first half, as revealed by the bank's earnings announcement earlier on Wednesday.
The stock's resilience will come as a welcome relief to the bank's new strategic shareholders, the quintet of investors who spent just over €1bn on shares at 10c a piece in a deal that kept BoI out of majority state ownership.
Ordinary shareholders who 'followed their money' and bought new shares at 10c a piece in the bank's recent rights issue will also be relieved that the shares haven't fallen off a cliff on 'bondholder day'.