State set to make €2.5bn from BoI deal

The Government stands to make an overall profit of up to €2.5bn from its initial €4.8bn investment in Bank of Ireland.

In a bid to fully exit State ownership, Bank of Ireland raised €580m through a share placement of 2,230,769,231 units at 26 cents per unit.

It used €537m of the proceeds to part refinance the €1.8bn in preference shares owned by the Government.

The remaining €1.3bn preference shares were sold at a premium of 104.75% of par value, which means that the Government saw a total return of €2.05bn from its €1.8bn investment.

“The successful exit by the State from its Bank of Ireland Preference Shares is a very positive and welcome development and will see the State recoup circa €2.05bn from this investment. These proceeds comprise the return of our principal, which is €1.837bn, a profit of €62m, and accumulated interest of €151m,” said Finance Minister Michael Noonan.

The Government sold €1bn of contingent convertible notes it held in Bank of Ireland last January. Between the sale of the CoCo notes, the fees it earned through the eligible liabilities guarantee scheme, and the sale of the preference shares, the Government has recouped €5.9bn from its €4.8bn investment in Bank of Ireland as part of the overall rescue of the banking system.

As the Government did not take part in the share placement, its ordinary equity in Bank of Ireland dropped from 15.1% to 14%. At the close of business yesterday evening, Bank of Ireland’s market capitalisation was €7.89bn, which means the Government’s remaining stake is worth roughly €1.1bn.

If Bank of Ireland had not redeemed the preference shares by Mar 31 next year, there was a 25% step-up clause that would have seen the State’s interest increase to €2.25bn.

“The Placing Stock will rank pari passu in all respects with the existing ordinary stock of the bank, including the right to receive all dividends and other distributions declared, made or paid on or in respect of such stock after the date of issue of the Placing Stock,” said Bank of Ireland, in a statement.

“Applications have been made for the Placing Stock to be admitted to the premium listing segment of the Official List of the UK Listing Authority and to the primary listing segment of the official list of the Irish Stock Exchange and to be admitted to trading on the main market for listed securities of the London Stock Exchange plc and the regulated market for listed securities of the Irish Stock Exchange (together “Admission”).

It is expected that admission will take place at 8am on Dec 9, 2013, at which time dealings in the placing stock will commence. Settlement of the placing is expected to occur on Dece 9, 2013, it added. SOurce: The Irish Examiner.