Shareholders approve BoI plan to raise €3.4bn

SHAREHOLDERS have unanimously backed Bank of Ireland’s multi-faceted €3.42 billion capital raising plan, despite a modicum of dissent at the extraordinary general meeting held yesterday to ratify the initiative.

Details of the plan, aimed at strengthening BoI’s post-NAMA balance sheet and meeting the end-of-year fundraising target of €2.7bn imposed by the Financial Regulator, were announced at the end of last month.

It features a share placing for institutional investors, a debt-for-equity swap with existing bondholders and a €1.9bn rights issue aimed at ordinary shareholders. The bank also intends to sell off subsidiary companies.

Bank of Ireland chairman Pat Molloy yesterday referred to the plan as “a significant further milestone” for the bank and one which places the company “in a significantly strengthened capital position”. However, some shareholders suggested the plan, particularly the rights issue, was a bad deal for investors, as it calls for people to put more money into the bank after having lost so much due to its share price collapse last year.

One shareholder described the overall plan as being “incorrectly structured, premature and too large”.

However, it and all other resolutions, yesterday received more than 99% of shareholder backing.

The bank’s chief executive, Richie Boucher, added that the bank needs to be “in charge of its own destiny”, saying that in order to be so it needs to shrink the size of its business and its costs and become more conservative. A move, which he said, should result in a greater consistency in profitability going forward.

As a result of this fundraising, the state will increase its stake in the bank by less than 2%, to 36%, with the long-standing threat of majority Government ownership effectively ended.

“We will be a more focused bank centred around a core retail and commercial franchise. This strong franchise will be capable of producing sustainable profits,” Mr Molloy added.

He also told shareholders that management was looking forward to a return to making dividend payments to investors.

Although, no payments are expected before 2012, Mr Molloy said that “we’ll get there as quickly as we can”.

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