More clues on rights and dilution; Friday after hours,,
BoI hopes to raise €1.9bn
Updated: 20:57, Friday, 8 July 2011
Bank of Ireland will attempt to raise €1.9 billion from existing shareholders in a rights issue next week.
1 of 1 Bank of Ireland - New shares will be offered to existing shareholders for 10c
Bank of Ireland - New shares will be offered to existing shareholders for 10c
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Bank of Ireland will attempt to raise €1.9bn from existing shareholders in a rights issue next week.
The new shares will be offered to existing shareholders at a price of 10 cent each.
Existing shareholders will be eligible to buy 18 new shares for every five existing shares they own.
The issue will be fully underwritten by the National Pension Reserve Fund, which will buy up any of the new shares the existing shareholders do not take up.
If existing shareholders take up 100% of the rights issue, the State's shareholding in the bank will be 29.2%.
If none of the new shares are taken up, and the Pension Reserve Fund has to buy up all the new stock, the State will own 69.7% of Bank of Ireland.
The main incentive for existing shareholders to take up the rights issue is the prospect of keeping majority control of the bank.
A 100% take up of rights would leave existing shareholders with 51.7% of the company. A 0% take up means their shareholding will be diluted to 11.2%.
The Pension Reserve Fund had an option to buy 15% of the new shares in a private placement, but will not now exercise that option, effectively leaving more shares available for existing shareholders.
The bank has also confirmed that it has held extensive discussions with a number of private equity funds and has received what it calls 'proposals for material investments in the bank'.
However, the proposals have certain conditions attached and no agreement has been reached with any private equity investors to date.
Bank of Ireland also confirmed that its Liability Management Exercise - or 'burning' of subordinate bondholders - has raised €1.96bn in capital.
It expects 'further measures' will raise an additional €500m in capital. This is believed to be by way of the Minister for Finance seeking a court order to impose losses on subordinate bondholders who did not accept the terms of the Liability Management Exercise, which was essentially a debt for equity swap, under which bondholders were offered new shares in the bank equivalent to 40% of the face value of their bondholding, or 20% if they wanted cash.
Most opted for shares, and the bondholders will now own 19.1% of the new equity of Bank of Ireland.
The bank must raise €3.8bn in fresh capital by the end of the month and a further €500m by the end of the year to meet Central Bank capital requirements.
An Extraordinary General Meeting of the bank will take place on Monday morning to approve the issue of the new shares, and the rights offer will open on Tuesday morning, closing on 26 July.:
AI
