Bank of Ireland to Swap $2 Billion of Junior Notes
December 08, 2010, 12:28 PM EST
By John Glover
(Adds analyst comment in fourth, eighth paragraphs.)
Dec. 8 (Bloomberg) -- Bank of Ireland Plc, the nation’s biggest lender, offered to swap subordinated bonds at a premium to the market rate as it seeks to bolster its capital.
The bank will exchange as much as 1.5 billion ($2 billion) euros of its lower Tier 2 bonds for new, 6.75 percent state- guaranteed notes in euros and pounds due 2012, according to a statement. The tenders will be at 46 percent to 57.5 percent of face value, a capital gain of as much as 450 million euros to go toward the 2.2 billion euros being demanded by regulators.
Ireland is preparing legislation to force subordinated bondholders to “share the burden” of bailouts with taxpayers. Lenders in distress including Lloyds Banking Group Plc have used buybacks to raise capital, and Anglo Irish Bank Plc offered 20 cents on the euro for its subordinated debt.
“As it stands, there is no real ‘stick’ being used to entice bondholder participation,” Glas Securities Ltd. analysts in Dublin said in a note today. “The details of the legislative changes next week could encourage higher participation.”
The Dublin-based bank is tendering for nine securities in total, according to the statement.
It’s offering 51 cents on the euro for the 420 million euros of 4.625 percent notes due 2019 still outstanding, which rose to 48.33 cents today from 44.75 cents yesterday, Bloomberg composite prices show. It will pay 48 cents for its 158 million euros of floating-rate notes due 2017, securities quoted at 44 cents today.
Bank of Ireland will pay as little as 46 cents on the euro for its $327 million of floating-rate notes due 2017 and callable in 2013. These rose 4.75 cents today to 42.25 cents, composite prices on Bloomberg show.
“It will come as some relief to investors that a coercive, more penal approach has not been adopted,” according to Glas. Bank of Ireland will still need as much as 1.8 billion euros of capital after the exchange, meaning “more self-help capital will be required if avoidance of majority government ownership is still an objective.”