“The EC has indicated that in line with its policy and pending its assessment of the restructuring plan that the bank should not make coupon payments on its Tier 1 and Tier 2 capital instruments unless under a binding legal obligation to do so,” the company said
**The suspension of the coupon payments means the bank won’t be able to pay dividends for a year. If Bank of Ireland can’t pay the 250 million-euro dividend it’s due to make to the government for its investment, the payment may be made in shares. **
It was always going to be…
online.wsj.com/article/BT-CO-201 … theadlines
sorry, Links here:
bankofireland.com/press_room … 00557.html
Nothing from Dep of Fin… YET, how come they were not advised/prepared ?
for those of us for whom the implications are not immediately obvious what does this mean?
That the existing shareholders will be further diluted as BOI issues new shares to the taxpayer in lieu of a coupon.
280 mn euro due in 8% divis gives 15% ownership? Am I diluting that right?
edit: just seen the link cavok put up to the BoI site - where do they get 250 mn from? I thought it was 3.5 bn of 8% preferreds?
I figured that.
Any impact on the guarantee to bond holders?
I thought it would be €250 million divided by the current market price of one BOI share = no. of newly issued shares?
This number of shares divided by the total number of ordinary shares issued to date would give you the % of the company that is being handed over.
If they did it that wat (ie. honestly) we would get far better value for money then we got for the recapitalisation money.
From the release:
In accordance with the terms of the 2009 Preference Stock, the NPRFC would become entitled to be issued, on February 20, 2010 or on a date in the future, a number of units of Bank of Ireland Ordinary Stock (based on the average trading price of Ordinary Stock in the 30 trading days prior to February 20, 2010, assuming the Ordinary Stock was settled on that date) related to the cash amount of the dividend that would otherwise have been payable (€250m), should there be no change in these circumstances.
The Bank is, however in ongoing discussions with the Department of Finance and the EC on this and other related matters as part of our overall engagement on the Bank’s restructuring plan and accordingly, this outcome is not certain.
I suppose see if this affects the share price tomorrow…
How can it not?
when will the fools that pumped them north of €3 only recently eventually realise that toilet paper is more valuable?
There appears to be 1004 million ordinary shares issued to date. Thats over a billion!! Open to correction.
At todays price of €1.48, €250 million would buy you 168,918,910 shares.
This would give you a new total for outstanding ordinary shares of 1172 million.
Giving the taxpayers’ new shares 14.3% of the company, of voting rights and of any future dividends.
There is no way BOI will allow this to happen.
The taxpayer will be given an IOU written on the back of a fag box and told to fuck off.
Well… it goes a little something like this (ahem)
The knee bone’s connected to the…
The thigh bone’s connected to the…
The Hip bone’s connected to…
IRE is pretty flat over in NY at the moment.
The 15% figure quoted above is wrong as far as I know. Paying the coupon in shares would be highly unconventional and potentially illegal. The more conventional approach is to convert the preference shares to ordinary shares. This leaves the government with majority ownership. This risk has long been priced into the shares.
Well, this is not the case, as far as I can see:
bankofireland.com/press_room … 00557.html
In accordance with the terms of the 2009 Preference Stock, the NPRFC would become entitled to be issued, on February 20, 2010 or on a date in the future, a number of units of Bank of Ireland Ordinary Stock (based on the average trading price of Ordinary Stock in the 30 trading days prior to February 20, 2010, assuming the Ordinary Stock was settled on that date) related to the cash amount of the dividend that would otherwise have been payable (€250m), should there be no change in these circumstances. The Bank is, however in ongoing discussions with the Department of Finance and the EC on this and other related matters as part of our overall engagement on the Bank’s restructuring plan and accordingly, this outcome is not certain.
Now, there have been rumours that BoI is trying to squeal out of this, no doubt AIB will find itself in the same position too. As you say, a full swap of the preferences is one way. The fact that nothing has happened so far suggests to me that it is the only way (i.e. the unpleasantest way) found so far.
Greg in the comments on Irisheconomy:
irisheconomy.ie/index.php/20 … ment-32576
On this I think you are mistaken. The conversion of an unpaid dividend is at the absolute discretion of the directors of the bank.
“Dividend: Fixed dividend of 8%, payable annually. Dividends payable in cash at the discretion of the bank. If cash dividend not paid, then ordinary shares are issued in lieu at a time no later than the date on which the bank subsequently pays a cash dividend on other Core Tier 1 capital.”
So, as long as the bank doesn’t pay dividend on ordinary shares they don’t have to pay the dividend on the preference shares. No?
How many years will it be before AIB and BOI pay dividend on ordinary shares?
What if AIB and BOI don’t pay a “cash” dividend on Core Tier 1?
What if they get really clever (with ECB approval of course) and find a non-cash way of paying dividend to new (and unknown investors)?
Can we call that a “reorganisation” of the capital of the banks in the “public interest”?
Sounds good to me. But then I’m just Paddy Six Pack.
This has been planned.
They (Cowen & Lenihan) knew when they “gave” €7,000,000,000 to AIB and BOI that it simply wouldn’t be acceptable to Paddy Six Pack. So they dressed it up as €560,000,000 annually to the Treasury. Paddy Six Pack took the bait. The two Brians knew that the cash would never be forthcoming and that the €7,000,000,000 was as good as the money they put into Anglo Irish Bank.
They did that with the oversight and collusion of the ECB.
edit: the next line in the DoF document is:
“The voting rights associated with such shares may be exercised from the date the dividend became payable.”
So, it looks like the state will have 14.3% additional voting rights in BoI even if the shares are not issued.
Bond, Eoin points out on irisheconomy:
irisheconomy.ie/index.php/20 … ment-32607
BoI received the funds on 31st March 2009, but evidently the annual coupon date has been fixed at the 20th February. As such, using my trusty abacus, multiplying 3.5bn x 326/365 x .08 =…….?
bankofireland.com/press_room … 00418.html
So that explains the 250 mn or thereabouts.
The oposition need to call the government out on this one. If the banks can wriggle out of this one then the NAMA legislation is not worth the paper its written on.
I think anyone with a brain knew this already.
Let those who were participating in the fiction explain this one away.