Bank of Ireland to sell Burdale and overseas finance units

BANK OF Ireland plans to sell its UK asset-based lender Burdale Financial and its global project finance units in the UK and internationally, to help raise capital as it tries to avoid Government control.

The bank purchased Burdale in January 2005 for €71 million and expanded the business into the US, with offices in New York and Connecticut from mid-2007.

Financial adviser Hawkpoint has been appointed to sell Burdale, while Deutsche Bank will sell the UK and international global project finance units.

Burdale financed the purchase of retailer Woolworths, car company Jaguar and the UK pottery firm Royal Worcester and Spode, as well as the management buyout of Glanbia’s Irish meats division.

It employs about 50 people and generates €30 million a year in profits. Some 25 people are employed in global project finance projects, which was involved in funding infrastructural projects and waste ventures in the UK.

It also funded the redevelopment of Highbury, Arsenal’s former football stadium in London.

Bank of Ireland was told to raise €4.2 billion and an additional buffer of €1 billion in contingency capital last week following stress tests by the Central Bank.

The Government has given the bank until June to secure private investment and further gains by repaying subordinated bondholders at a discount or else face majority Government control.

The bank, which is 36 per cent State owned, believes it can avoid majority State ownership.

Central Bank governor Patrick Honohan said the bank would be given time to raise capital but that it was realistic to assume that the Government would take a majority stake in each bank given the amounts they have to raise.

The bank is expected to announce a capital-raising plan, including proposals to raise cash from existing shareholders, when it releases its 2010 financial results on Thursday, April 14th.

Bank of Ireland’s subordinated debt was downgraded by Fitch along with bonds at AIB and EBS after the Government said it would seek contributions from subordinated bondholders to help meet their capital requirements.

Bank of Ireland has about €2.75 billion of subordinated bonds and could generate between €500 million and €1 billion from a tender based on the take-up and the levels at which they are trading.

Fitch said that any future tender offer by the lenders were likely to be coercive. Anglo Irish Bank and Irish Nationwide have both made coercive offers to subordinated bondholders to reduce their costs.