Wednesday 29 January 2020

Three investment banks in frame to underwrite 'rights issue' deal

Joe Brennan

BANK of Ireland has positioned itself to launch a three-pronged €2.5bn-plus plan to raise equity as early as five weeks' time, after changing the date of its financial year-end.

The group has moved the end of its fiscal year from March 31 back to December 31, as it would otherwise have been unable to go to the market to raise equity until the end of May -- for two reasons.

First, BoI would have faced at least a six-week 'closed period' between the end of March and when its full-year figures were published -- when publicly quoted firms are banned from making potential market- moving announcements.

The bank had been expected to publish a management statement yesterday, but did not do so.

And, more importantly, senior corporate finance sources said that no board of an Irish bank would agree to sign up to a share-sale prospectus in the current environment without having a newly audited set of accounts before it.

BoI is preparing to come out at the end of March with results for the nine months to the end of December.

But sources said the timing of anticipated 'rights issue' share sales by the two main banks is still highly uncertain, as Brussels' verdict on their restructuring plans continues to be dragged out.

Hopes that BoI and Allied Irish Banks would have feedback at the end of this month are set to be dashed. Sources said this is due to the recent changeover of top figures in the EU Commission, and the authorities taking a more probing view of Irish banks' viability plans, particularly that of Anglo Irish Bank.

Still, they indicated the Commission is at a more advanced stage in signing-off on the National Asset Management Agency (NAMA) project, as the five participating banks race to complete documentation ahead of an expected transfer of the first tranche of loans at the end of next week.

In the meantime, it is understood that three investment banks -- Credit Suisse, Deutsche Bank and UBS -- are lining up to partly underwrite -- or guarantee -- a €1bn-plus, heavily discounted rights issue by BoI.

The Irish Independent reported last month that Credit Suisse had assumed a top advisory role with BoI, after high-flying corporate banker Chris Williams moved to the Swiss investment bank from Citigroup. Both Credit Suisse and UBS, BoI's broker, advised on the group's recent subordinated debt restructuring deal, which raised €405m.

It is also believed that the Government plans to convert a tranche of its €3.5bn of preference shares. The State is also likely to partly underwrite a rights issue.

The final element of the €2.5bn-plus package would see BoI raise in the region of €500m through a conversion of some of its so-called tier 1 and upper 2 subordinated bonds into equity.

Well-informed sources have poured cold water on speculation emanating from London late last week that a private equity or strategic investor could also be brought on board.

Capital-raising plans are integral parts of the EU restructuring plans of both BoI and AIB. Both will have to be in a position to provide prospective investors with clarity on their expected writedowns on NAMA-bound loans as well as their remaining portfolios.

Meanwhile, BoI is locked in talks with the Department of Finance and Commission officials over the treatment of the first €250m dividend due this weekend on the State's preference shares in the bank.

Brussels has placed a coupon 'stopper' on a number of BoI securities, as it continues its deliberations on the bank's restructuring plans. The Government is entitled to shares in lieu of a cash dividend -- equivalent to a 15pc-20pc stake.

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