Bank of Ireland and the Government are in advanced discussions with potential investors with a view to taking a share in the bank, it was confirmed yesterday.
Finance Minister Michael Noonan's department yesterday took the unusual step of issuing a press statement about the negotiations, ahead of the bank's rights issue on Tuesday.
"The State is in discussions with potential equity investors in Bank of Ireland in relation to a possible material investment in the bank.
"As at the time of this announcement, these discussions continue and may or may not lead to a transaction.
"It is not possible to say anything further at this time in relation to the ongoing discussions," the statement said.
Mr Noonan declined to comment further on the matter, but the issuance of the statement was seen last night as a sign that matters were at an advanced stage.
Earlier this month, Bank of Ireland Governor Pat Molloy said the chances of a private equity investment in Bank of Ireland had not been fully extinguished.
Speaking to investors ahead of a vote on a proposal to raise €1.9bn by issuing new shares, Mr Molloy said extensive discussions with "private equity interests" had not reached a successful conclusion.
"That is not to say that they have totally gone away," said Mr Molloy.
The bank is seeking to raise €4.2bn in cash and a further €1bn in contingent capital after being directed to meet a higher capital bill by the Central Bank following the stress tests of the banks last March.
It has generated €1.96bn by repaying subordinated bondholders at a fraction of what they are owed in a heavily discounted cash-or-shares deal and expects to raise a further €510m from further so-called "burden-sharing" with bondholders by the end of the year.
The bank changed the terms of the capital-raising plan to allow the placing of a stake of 15 per cent to the State's wealth fund, the National Pension Reserve Fund, that could be sold on to private equity investors.