Thursday 19 April 2018

New investors in Bank of Ireland break their cover

Laura Noonan

THE identity of Bank of Ireland's new strategic investors was revealed last night as the bank completed the final stage of a €5.2bn capital raise that will see the State's shareholding fall to just 15pc.

Canadian insurance giant Fairfax Financial, described as the "lead" in the deal, is taking a stake of just over 9pc in BoI, with the same share going to billionaire investor Wilbur Ross and the US investment giant Fidelity.

California-based investment house Capital Group will hold about 6pc, while fellow US firm Kennedy Wilson will get a much smaller stake after investing €25m of the €1.05bn stumped up by the quintet.

Fairfax Financial chief executive Prem Wasra confirmed the companies' respective shareholdings in an interview with the Irish Independent last night and said they would appoint one director.

All shareholdings will be managed independently, removing the need to seek regulatory approval for a stake of more than 10pc.

Mr Wasra described his outfit as "friendly investors" seeking "long-term value" and said they would hold their positions for several years.

In a statement, BOI said the new shareholders "have endorsed the bank's strategy and the bank's view that the Irish economy will come through a difficult period of adjustment and return to growth".

The comments were echoed by Mr Wasra. He heaped praise on BOI boss Richie Boucher, saying: "We wouldn't have done the deal without him."

Yesterday's manoeuvres mean that 'old' shareholders will be left with 31pc of the bank, bondholders will get 19pc, while the State gets 15pc and the newcomers get 35pc.

The new investors are getting close to the maximum 37pc stake they hoped for after 65pc of the bank's 'old' shareholders passed up their opportunity to buy new shares in a rights issue.

The acceptance level was higher than expected, but it still left BoI with 6.3 billion shares to sell off in a placement today.

The bank sold 1.4 billion of those shares at the "premium price" of 10.1c against the rights issue price of 10c.

The remaining shares were then passed over to the Government, which sold them on to the new investors at 10c a piece.

The newcomers also bought a significant amount of the Government's 'old' shares.

The State will now be left with just 15pc of the bank, the minimum Finance Minister Michael Noonan said he was willing to let the Government's stake slip to.

"This is good news, the smaller the state shareholding, the better," one analyst said last night.

Some observers criticised the deal as a "firesale", pointing out that the State had poured billions into the bank and was left with a stake worth just €3bn.

A spokesman for the Department of Finance last night said that the 15pc stake reflected an investment of €1.9bn.

The state has also paid €1.8bn for preference shares that yield dividends of 10-12pc, and is pumping in €1bn as a "contingent convertible" loan.

The spokesman stressed that yesterday's deal "incentivises" BoI's shareholders to continue making payments on the preference shares and repay the contingent convertible loan.

If they don't, both instruments will convert to new ordinary shares for the State, diluting private shareholders.

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