Lenihan Applauds Bank Of Ireland Stock Sale
The Minister for Finance, Mr. Brian Lenihan T.D., welcomed the announcement on Sunday that Bank of Ireland intends to raise €3.4 billion of equity capital.
This will ensure the Bank meets the stringent capital requirements set out by the Regulator.
The National Pension Reserve Fund Commission (NPRFC) will enter into a transaction with Bank of Ireland which will form part of this capital raising exercise.
The NPRFC has agreed to subscribe for 576 million units of Ordinary Stock at a price of €1.80 per unit.
To pay for this stock the NPRFC will convert 1,036 million units of the 2009 Preference Shares into Ordinary Stock at a price of €1 per unit (or par value).
As part of the transaction, Bank of Ireland will repurchase all of the warrants issued in conjunction with the 2009 Preference Stock.
The State will receive a net €491 million in cash for its warrants in the bank which represents the profit generated on the investment over the past year.
Mr Lenihan said: "This transaction is good news for our economy, good news for the taxpayer and good news for Bank of Ireland's shareholders and investors.
"The level of private sector investment is tangible evidence of the growing international and domestic confidence in both Bank of Ireland and our economy.
"I have stressed on numerous occasions that others have confidence in us and we need to demonstrate that confidence in ourselves.
"Today's announcement shows that Ireland can and is addressing the difficulties in our financial sector."
The Minister said that Bank of Ireland has a strong future as a well capitalized and cleaned up bank that will benefit its investors and our economy.
He added that the transaction has been agreed on market terms which will allow the State and its taxpayers achieve a significant return on its investment. This transaction represents a good deal for the taxpayer.
The Minister said: "Bank of Ireland is the first of our financial institutions to emerge from the banking crisis.
"Through NAMA, we have removed the crippling uncertainty about the losses resulting from the bank's riskiest loans -- and we have done so on terms that are fair to the taxpayer.
"The transactions announced ... are consistent with the long-stated Government preference that private market solutions to capital rising are found and implemented.
"Our policies have delivered a cleaner, well-capitalised and better funded Bank of Ireland that is now in a position to provide credit to support economic recovery and new job creation."
When this deal is completed the Irish Government will still hold a 36.5% share in the bank, including approximately €1.78 billion of preference shares which will earn a higher coupon of 10.25%
The Government will also make €491 million profit on its warrants andwill receive some €51 million in fees for conducting this deal
Continuing, Minister Lenihan said, "The strongly recapitalized Bank of Ireland will now be in a position to provide credit to Irish businesses and households as the economy recovers.
"The transaction agreement provides a legal basis for the credit package. Bank of Ireland's plan, setting out how they propose to meet these targets, will be submitted to my Department by May 14.
"The overriding objective of the Government's banking policy is to ensure a healthy functioning banking system that can meet all the needs of the economy. Today's announcement is a crucial step in realising this objective."