Sunday 15 December 2019

Pension fund to get €90m for backing BoI €5.3bn capital drive

Laura Noonan

THE National Pension Reserve Fund looks set to be paid fees of about €90m for supporting Bank of Ireland's upcoming capital drive, the Irish Independent has learned.

The bumper fees for the state pension fund -- which account for well over half the €150m capital raising charges pencilled in by BoI -- were revealed in answer to a parliamentary question from Sinn Fein finance spokesman Pearse Doherty.

BoI has to raise €5.35bn by the end of July, and has already got about €2bn by convincing bondholders to exchange their debt for shares in the bank.

The Government has committed to pumping in any cash not raised privately.

The information given to Mr Doherty shows the State will charge about €70m for acting as "underwriter" and guaranteeing to mop up any new shares not bought by investors.

The €70m stems from the 4pc underwriters' fee imposed by the NPRF -- a rate described as "high" by market sources. Underwriters' fees are typically less than 2pc, but rise if there is a greater risk that the underwriter will ultimately have to buy shares. The figures are a rights issue of €1.78bn -- the scenario outlined in BoI's latest market update -- the exact size of the issue will be revealed tomorrow.

The NPRF is also in line for a "corporate finance fee" of €3m and a fee of €15m linked to the €1bn "contingency convertible" loan advanced by the State to the bank, Finance Minister Michael Noonan said.

Another €4m will be paid to the State to cover "all costs and expenses", the minister confirmed, bringing its total haul to just over €92m, assuming the rights issue comes in at €1.78bn.

Another €6.6m of private sector costs are detailed in Mr Noonan's answer, including a €4m "transaction co-ordinator/financial adviser fee" and a €1m "sponsor fee".

BoI's transaction co-ordinators and financial advisers are IBI Corporate Finance and Credit Suisse, a bank spokesman confirmed last night, while Davy and UBS are acting as joint sponsors.

Other fees to private entities include an "incentive fee" of about €1.14m and a rights issue "fixed fee" of €450,000. These are both based on a rights issue of €1.78bn. BoI will also pay all costs associated with the private element of the capital raise.

In a statement, Mr Noonan stressed that BoI had "applied value-for-money principles in determining the expenses of capital raising".

He said BoI took into account market precedent, benchmarking and included appropriate incentivisation.

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