British pensioners threaten challenge to BoI capital plan
A group of up to 2,000 British pensioners are threatening legal action over the bank’s plan to buy back the debt they hold at a heavily discounted rate. The case refers to bonds issued by the Bristol & West Building Society in the early 1990s before it was acquired by BoI.
As part of BoI’s €5.2 billion capital raising effort, approximately €2.6bn is set to come from buying back discounted debt from junior bondholders. In the case of the Bristol & West pensioners, 20p is being offered for every pound they have invested in bonds, with those voting against the bank’s “liability management exercise” only getting 1p for every £1,000 invested.
Bondholders have until June 22 — a week after BoI’s highly anticipated annual general meeting tomorrow — to respond to the proposal before BoI makes a reduced offer.
“The bond in question is a capital instrument and is not a retail savings product. The higher risk associated with such capital instruments was reflected in the high interest rate of 13.375% per annum, and the discount to par at which the bond was trading ahead of the announcement of the liability management exercise — trading at around 40% of face value,” a BoI spokesperson said yesterday.
The latest development follows reports that US-based bondholders will offer to underwrite BoI’s planned rights issue in return for better deal terms, including a shelving of the high haircut plans.
“The bondholders are feeling aggrieved about being bailed into the bank at substantially less than par,” said according to Eamonn Hughes of Goodbody Stockbrokers. “However, they’re seeking to be converted at par, indicating they will be there to fully underwrite the rights issue as well, which presumably means they want to become rights rather than ex-rights.
“If they don’t get their way, they will seek to block the liability management exercise.”
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