State Banking Sector

Dáil Éireann Debate, Tuesday - 21 May 2013

Tuesday, 21 May 2013

Questions (275)

Pearse Doherty

Question:

275. Deputy Pearse Doherty asked the Minister for Finance if he is targeting a sale of Bank of Ireland preference shares before the deadline of the par payment by Bank of Ireland in March of 2014 of the €1.8 billion in preference shares; if he is concerned about risks of dilution of the value of the States shareholding in Bank of Ireland if the Bank is required to raise capital to replace the par payments made to the state under the preference share agreement with the Bank; if he will detail how much of the €1.8 billion par repayment of the preference shares he expects to receive from Bank of Ireland in March 2014 and if he expects to be paid in ordinary shares in the bank or in cash settlement for this par repayment; if he will detail when the total €1.8 billion is required to be repaid in par repayment from the Bank; if he will detail whether any par settlements for these preference shares are directly returnable to the Exchequer or the national pension reserve fund; and if he will make a statement on the matter. [24263/13]

Written answers

Minister for Finance

At its recent results briefing, Bank of Ireland indicated that it was considering a range of options relating to its preference shares issuance. I can confirm to the Deputy that officials in the Department of Finance, as part of their regular interaction with Bank of Ireland management, have discussed options regarding the State’s current holding of €1.8bn of preference shares.

Bank of Ireland has not indicated to the market or my Department that it has any intention to raise more capital from shareholders at this time. I can, however, confirm for the Deputy that, should Bank of Ireland decide to do so at some point in the future, I would naturally consider the options open to the State in this regard at that time. If the mechanism chosen was a rights issue, any decision in relation to exercise of rights attaching to our current holding would be made having assessed the best interests of the State.

The structure of the preference shares includes a provision for a step-up on the principal of 25% if they are not redeemed by March 2014. This would result in an additional liability for the bank of €450m, but payable to the State only on redemption. The step-up applies only to the principal amount and not to the coupon payable. There is no required repayment date as the preference shares are perpetual.

The shares are a directed investment held by the NPRF and any repayment of the shares would be to the NPRF.

As we are only at a preliminary discussion stage of a range of options, with many moving variables, it is not possible at this point to speculate as to the outcomes of what might take place.