Bank of Ireland to unveil rights issue

BANK of Ireland has announced plans for a rights issue to be underwritten by the state as the latest element of its overall recapitalisation effort.

Following up on its previously announced plan to make its junior bondholders share some of the burden of its fundraising needs — potentially covering as much as €2bn of the €5.2bn it needs — the bank said yesterday that it will undertake a rights issue at a price of 10c, with the exact size determinable after the results of its bond offers are known.

Regarding the timing of the rights issue, the bank said that it will be issuing its offer memorandum “shortly”.

Bank of Ireland has already said that it will offer to buy back debt from junior bondholders at between 10% and 20% of its original value.

Its plans for meeting its overall €5.2bn recapitalisation target — as set out by the most recent Central Bank stress test calculations — also include a debt-for-equity swap for bondholders.

The latter option is likely to see them offered either 20% or 40% of the original value of their bonds.

Glas Securities director Michael Cummins was quoted by Bloomberg as saying that it is “reasonable to assume” that Bank of Ireland will raise between €2bn and €2.25bn from junior bondholders taking up the cash and debt exchange offer.

“The big unknown for investors looking at the debt-equity option,” Mr Cummins added, “is what price they’ll be offered the stock.”

The bank said it will make further announcements on its proposals shortly and that it continues to have discussions with “other sources of private capital” in the meantime.

Minister for Finance Michael Noonan said this week that the bondholder contributions that each of the Irish banks are planning as part of their fundraising rounds are simply the minimum levels acceptable to Government, and action will be taken if they are not successful.