Fundraising drive helps shares to jump by 5%

SHARES at Bank of Ireland jumped 5% yesterday after the bank announced details of its €3.4 billion fundraising drive.

The measures, which will see the state’s shareholding in the bank increase to 36%, sent the shares up, closing at €1.89, resulting in the bank’s value increasing to €2.24bn.

AIB shares increased 4% to close at €1.56.

Bank of Ireland plans to sell €500 million in shares to a group of institutional investors and an additional €1.9bn of stock in a rights offer. About 90% of the rights issue will be funded through a debt-to-equity conversion, in which the Irish state will convert roughly €700m of its bank bonds to equity. The Government will contribute €1.7bn to the capital raising.

The bank also plans to convert some of the Government’s preference shares into equity, raising €1.04bn. The state will retain a maximum stake of 36%.

Senior equity strategist at Irish Life Investment Managers, James Forbes said: “The big news is the placing of €500m of stock with institutions and demand for this will be a good barometer for the level of interest in Ireland Plc again by international investors. The company looks to have ticked all the boxes and is well down its re-capitalisation road.”

Merrion Capital analyst, Sebastian Orsi said: “There may be some disappointment at the dilution, but it’s well anticipated and overall the transaction terms look attractive. The money has been effectively raised now. I’d expect a good level of take-up of the rights.”

The placement of stock with institutional investors and the conversion of government preference shares will be at a price of €1.53, or 15% less than the April 23 closing price.

Bank of Ireland said the move will boost its equity tier one ratio to 8% from 5.3% at the end of last year.