Monday 16 September 2019

Boost as Government sells on €1bn bailout investment in Bank of Ireland

Donal O’Donovan

THE government has sold €1bn bonds used to bailout Bank of Ireland to international investors in a surprise deal.

The amount of so called “contingent capital” sold in today’s deal doubled during an intense bidding session earlier today, with bids of as much as €4.8bn on the table.

The €1bn bonds of bonds were sold for €1.01bn, slightly above face value, so there is a small profit for the government on the deal.

Buyers, including some Bank of Ireland shareholders, get 10pc interest per year from the bank for holding the debt.

The deal means a further reduction in the €4.7bn that the state pumped into Bank of Ireland to prevent its collapse.

The government currently holds 15pc of the Bank of Ireland

Reacting to the deal, Finance Minister Michael Noonan said:"This disposal is very positive as it will enable the Irish State to start reducing the level of indebtedness that was generated by the banking crisis.

Since making this €1bn investment in Bank of Ireland in July 2011 the Irish taxpayer has received a generous return of 10pc per annum on its money while this disposal will also generate a profit in the region of €10m.”

American investors bought a 35pc stake in the bank 18 months ago.

The announcement comes a day after Ireland sold €2.5bn of debt, raising a quarter of the €10bn it aims to borrow in 2013 ahead of a planned exit from its EU/IMF/ECB bailout.

The government said on Wednesday that its successful exit from a large portion of the capital notes in Bank of Ireland, which also returned to bond markets last year to raise €1bn, would represent another step in the normalisation of Ireland's banking sector.

Davy, Deutsche Bank and UBS were mandated to manage the placement.

The Department of Finance said the deal followed an approach by investment banks late last year, that indicated that there was sizeable investor interest in the notes.

Also in Business