Bank of Ireland is close to raising €500m to €600m through a share placement in order to part refinance the Government’s €1.8bn preference shares that have to be redeemed by the end of next March, according to sources.
If the preference shares are not redeemed before Mar 31, then there is a “step up” clause that would see the value of the Government’s preference shares increase by 25% to €2.25bn.
There has been intense speculation over the past few weeks that the bank was about to launch an imminent rights issue or share placement.
Bank of Ireland issued a statement to the Irish Stock Exchange yesterday evening. “The bank notes recent media reports regarding the 2009 preference shares. The group continues to proactively formulate and assess a range of options in relation to the 2009 preference shares with our assessment of such options carefully taking into consideration our various stakeholders, including the regulatory authorities.
“Such options could include the bank facilitating a potential sale by the State of 2009 preference shares to private investors and some element ofordinary stock issuance to redeem a portion of the 2009 preference shares. However, no firm conclusions have been reached and there is no certainty that any transaction will proceed.”
It is believed that Bank of Ireland will look to a share placement to raise the finance on the basis that its two biggest shareholders — the Government and US investor Wilbur Ross — were not in favour of a rights issue.
It will raise the equity through a placement to retire around a third of the preference shares with the balance made up from the sale of a debt instrument to private investors at a profit to the State, said a source familiar with the situation.
The deal is unlikely to happen before the Thanksgiving holiday this week due to a large amount of US investor interest and until Irish banks get the results of a balance sheet assessment carried out by the Central Bank.
Moreover, market sources say that the Government could look to sell its 15% ordinary shares soon after it divests the preference shares. This would further improve the State coffers and return Bank of Ireland completely to the private fold.
The Government declined to comment.
A successful refinancing of the preference shares would be a big milestone for the bank, the sector and for the government ahead of its exit from an €85bn EU/IMF state bailout next month.
Additional reporting Reuters
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