Bank of Ireland
Bank of Ireland, Allied Irish Advance on $7.7 Billion Bailout
By Ian Guider and Louisa Nesbitt
Dec. 22 (Bloomberg) -- Bank of Ireland Plc and Allied Irish Banks Plc surged in Dublin trading after the government said it will inject 2 billion euros ($2.8 billion) into each of them to protect the Irish financial-services industry from collapse.
Bank of Ireland climbed as much as 44 percent, the most in two decades, while Allied Irish Banks Plc rose 21 percent following the announcement late yesterday. Anglo Irish Bank Corp. fell 15 percent after the government said it would take control of the company by pumping in 1.5 billion euros.
Ireland, which was the first country in Europe to guarantee all bank deposits, is being forced to use public money after initially urging the banks to seek private investors to assist in the country’s bank bailout. Since the guarantees on Sept. 30, the ISEF Financial Index has plunged 72 percent as lenders’ capital was eroded by bad loans to homeowners and property developers in Ireland and the U.K.
“There was always going to be a relief rally,” said Alex Potter, an analyst at Collins Stewart in London. Anglo Irish will become “state controlled though remains publicly owned. This means the equity remains highly dangerous in the near-term,” he said.
Bank of Ireland and Allied Irish will give the state preference shares that pay an 8 percent annual dividend and 25 percent of the voting rights on issues such as change of control and capital structure. That is in contrast to Anglo Irish, which is giving the state preference shares that will pay a fixed 10 percent annual dividend 75 percent of voting rights. The preference shares are “perpetual” and won’t convert into ordinary shares.
The dividend payable to the government is lower than the dividend of about 12 percent the U.K. has charged British banks that tapped it for new capital.
Management Change
The decision comes days after Anglo Irish was embroiled in a scandal related to Chairman Sean Fitzpatrick’s non-disclosure of 87 million euros in loans he received from the bank. Both Fitzpatrick and Chief Executive Officer David Drumm resigned last week.
The state is also prepared to underwrite a further issue of as much as 1 billion euros in shares by both Allied Irish and Bank of Ireland. The finance ministry said that while it has a “substantial pool” of additional capital available, it “encourages” the banks to seek private money.
Bank of Ireland is “very seriously considering” raising as much as 1 billion euros in additional capital, CEO Brian Goggin told analysts on a conference call. “We’re not going to take it if the consequences of it are materially detrimental to shareholders. We aren’t taking it at any cost.”
Bank of Ireland rose as much as 29.4 euro cents to 96.9 cents, and traded 29 percent higher at 87 cents as of 9:50 a.m. Allied Irish climbed 21 percent to 1.99 euros, while Anglo Irish fell 3.2 cents, or 9.1 percent, to 31.8 cents.
To contact the reporters on this story: Ian Guider in Dublin at iguider@bloomberg.netLouisa Nesbitt in Dublin at lnesbitt@bloomberg.net
Last Updated: December 22, 2008 05:24 EST
By Ian Guider and Louisa Nesbitt
Dec. 22 (Bloomberg) -- Bank of Ireland Plc and Allied Irish Banks Plc surged in Dublin trading after the government said it will inject 2 billion euros ($2.8 billion) into each of them to protect the Irish financial-services industry from collapse.
Bank of Ireland climbed as much as 44 percent, the most in two decades, while Allied Irish Banks Plc rose 21 percent following the announcement late yesterday. Anglo Irish Bank Corp. fell 15 percent after the government said it would take control of the company by pumping in 1.5 billion euros.
Ireland, which was the first country in Europe to guarantee all bank deposits, is being forced to use public money after initially urging the banks to seek private investors to assist in the country’s bank bailout. Since the guarantees on Sept. 30, the ISEF Financial Index has plunged 72 percent as lenders’ capital was eroded by bad loans to homeowners and property developers in Ireland and the U.K.
“There was always going to be a relief rally,” said Alex Potter, an analyst at Collins Stewart in London. Anglo Irish will become “state controlled though remains publicly owned. This means the equity remains highly dangerous in the near-term,” he said.
Bank of Ireland and Allied Irish will give the state preference shares that pay an 8 percent annual dividend and 25 percent of the voting rights on issues such as change of control and capital structure. That is in contrast to Anglo Irish, which is giving the state preference shares that will pay a fixed 10 percent annual dividend 75 percent of voting rights. The preference shares are “perpetual” and won’t convert into ordinary shares.
The dividend payable to the government is lower than the dividend of about 12 percent the U.K. has charged British banks that tapped it for new capital.
Management Change
The decision comes days after Anglo Irish was embroiled in a scandal related to Chairman Sean Fitzpatrick’s non-disclosure of 87 million euros in loans he received from the bank. Both Fitzpatrick and Chief Executive Officer David Drumm resigned last week.
The state is also prepared to underwrite a further issue of as much as 1 billion euros in shares by both Allied Irish and Bank of Ireland. The finance ministry said that while it has a “substantial pool” of additional capital available, it “encourages” the banks to seek private money.
Bank of Ireland is “very seriously considering” raising as much as 1 billion euros in additional capital, CEO Brian Goggin told analysts on a conference call. “We’re not going to take it if the consequences of it are materially detrimental to shareholders. We aren’t taking it at any cost.”
Bank of Ireland rose as much as 29.4 euro cents to 96.9 cents, and traded 29 percent higher at 87 cents as of 9:50 a.m. Allied Irish climbed 21 percent to 1.99 euros, while Anglo Irish fell 3.2 cents, or 9.1 percent, to 31.8 cents.
To contact the reporters on this story: Ian Guider in Dublin at iguider@bloomberg.netLouisa Nesbitt in Dublin at lnesbitt@bloomberg.net
Last Updated: December 22, 2008 05:24 EST
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