BoI aims for €1.91bn share sale

BANK of Ireland is aiming to raise €1.91 billion from the upcoming rights issue element of its re-capitalisation effort.

The figure, announced by the bank yesterday evening, comes in at the lower end of its previously stated target range for the share sale — a result which had already been predicted by many banking analysts. The bank’s shareholders are due to vote on its re-capitalisation process at an extraordinary general meeting on Monday.

Bank of Ireland also said yesterday that around 73% of its subordinated bondholders have agreed to its debt-for-equity/cash offer. The company has previously said that it could raise a minimum of €2bn from a deal with its bondholders.

This would still be less than half of the €5.2bn total it needs to find — in a mix of core Tier-1 capital and contingency funds — in order to meet its funding targets, as set out in the last round of stress tests on the Irish banks.

All of the main Irish banks that are directly involved in the latest re-capitalisation round have made it clear in recent months that junior bondholders would contribute to their overall refunding needs, thus reducing the amount of extra funding in the banks likely to have to come from the state or taxpayer.

Finance Minister Michael Noonan has said that the combined burden-sharing efforts from the banks with regard to their bondholders were the minimum levels acceptable to Government and action would be taken if they weren’t successful.

He said that Government would take “whatever steps are necessary” to ensure bondholders shared in the cost of re-capitalising the Irish banks.

Bank of Ireland will issue €654.17m of new notes and pay investors over $18m in cash under the terms of its debt exchange deal. The Government has committed to underwriting Bank of Ireland’s planned rights offering at 10c per share.

The bank had already stated a range of between €1.8bn and €2.2bn as its targeted raise from the rights issue alone. Analysts had been forecasting a take somewhere near the lower end of that scale.

Goodbody Stockbrokers has forecast that — post-re- capitalisation efforts — BoI’s bondholders will end up owning just over 20% of the bank, with existing shareholders owning just below 20% and the Government around 60%.