Tuesday, 13 May 2014

Ceisteanna (221)

Seamus Healy


221. Deputy Seamus Healy asked the Minister for Finance the value of the preference shares, which were held in Bank of Ireland by the State, sold in recent times to Baggot Securities; the nature of the company Baggot Securities; if the company is connected in any way with Bank of Ireland; the monetary amount by which the equity in Bank of Ireland held by the State was reduced due to the rights issue by Bank of Ireland; if the money was raised through the rights issue used by Bank of Ireland to purchase preference shares held by the State; and if he will make a statement on the matter. [21517/14]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The State held preference shares in Bank of Ireland with a nominal value of €1,837m.

The State sold preference shares with a nominal value of €1,300m to Baggot Securities Limited. The preference shares were sold at a 4.75% premium to nominal value thereby yielding a profit of approximately €62m for the State. The total proceeds from this sale to Baggot Securities Limited, including accrued interest and the profit on the transaction, amounted to €1,469m.

Baggot Securities Limited is a special purpose company and is not connected in any way to Bank of Ireland. The purpose of Baggot Securities Limited was to issue debt securities to third party investors and to use the proceeds arising to purchase preference shares from the State. 

As part of the capital package to repay the State's entire holding of preference shares, Bank of Ireland issued new ordinary shares by way of a private placing to investors.  The cash raised by Bank of Ireland by way of the private placing was used to repay €537m of the total nominal value of €1,837m of the preference shares. Including accrued interest, this part of the transaction yielded cash proceeds of €581m for the State.

The State did not participate in the private placing and the issuance of new ordinary shares had no impact on the number of ordinary shares held by the State. As the number of ordinary shares in issue increased following the private  placing, the State's percentage shareholding reduced from c.15% to c.14%. For the avoidance of doubt, there was no rights issue involved.

In summary, the proceeds from the sale of preference shares to Baggot Securities Limited combined with the proceeds from the partial redemption by Bank of Ireland facilitated by the private placing generated total proceeds of €2.05bn for the State.