Saturday 20 January 2018

Ptsb to fire starting pistol on markets refloatation

Permanent TSB Group chief executive Jeremy Masding
Permanent TSB Group chief executive Jeremy Masding

Graham Fahy, Donal O'Donovan and Conor Humphreys

Permanent TSB will fire the starting gun today on a stock market reflotation of the bailed out bank, which is expected to unveil details of a planned €400m share sale.

Formal announcement of the State-owned bank's capital-raising plan will kick-start what is likely to be a four-week run-in to a sale of new sales on the Dublin stock exchange.

The bank plans to raise a further €125m of capital by issuing risky "additional tier 1 bonds", a form of corporate debt that would convert into bank shares if the bank ran into financial difficulties in future.

Given the tiny stake in the bank that is currently held by shareholders other than the State, the sale process effectively amounts to an initial public offering (IPO) of the bank.

The bank will also release an updated trading statement today.

Management at Permament TSB, led by Jeremy Masding, and advised by Deutsche Bank, have already been involved in an intensive round of negotiations with around 100 institutional investors, which are expected to dominate buying at the planned IPO.

Current shareholders have been told they will be able to participate in the equity raising - by paying up for new shares.

However, failure to buy into the deal will inevitably lead to further dilution for small shareholders who have already seen their investment all but wiped out when the bank was recued by taxpayers.

The sale of shares is the cornerstone of the bank's previously announced plan to raise €525m before the end of June. The money is needed to meet a Europe-imposed requirement to bolster its own finances by €125m and in order to repay a €400m bailout loan owed to taxpayers.

Money raised by the State from the sale will be used to reduce the national debt by paying off a share of expensive IMF bailout loans, the Minsister for Finance, Michael Noonan, said last month.

Minister Noonan has said that he plans to retain a majority stake in Permanent TSB in the short term.

The State's more than 99pc stake in the bank will also be diluted as a result of the capital raising, but depending on investor demand which should become clear over the coming weeks, the Government is also expected to further reduce its stake in the bank by selling additional shares.

Yesterday Permanent TSB confirmed completion of a stock consolidation that reduced the number of its outstanding shares by 99pc.

The change does not change the ownership stake in the bank, which is more than 99pc state owned. However, it means that every 100 old shares have been replaced by one new share.

The stock consolidation is part of a process to simplify the bank's capital structure ahead of a planned sale.

The changes to the share structure will take place automatically and new share certificates will be issued following a vote at last week's annual general meeting (AGM).

Approval for an equity raising was also voted through at the AGM.

A spokesman for the bank and for the Department of Finance declined to comment on the share sale plans.

The Permanent TSB deal will be the most significant capital raising by an Irish lender since Bank of Ireland sold a 35pc stake to a consortium led by Wilbur Ross and Prem Watsa in 2011. The five investors who backed that €1.1bn deal went on to more than triple their money. AIB is also being prepared for a partial sale later this year.

Irish Independent

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