THE COMMERCIAL Court has confirmed an €800 million reduction in Bank of Ireland’s stock premium fund required to pay a €214 million dividend to the State’s National Pension Reserve Fund as part of the scheme to recapitalise the banks.
Mr Justice Brian McGovern yesterday agreed to an application by Paul Sreenan SC, for Bank of Ireland (BoI), to grant the bank’s petition for the fund reduction.
The court was previously told the reduction has no adverse implications for the bank’s solvency, will not prejudice the rights of its creditors or members, and, after reduction, the balance in the stock premium account would be €4.299 billion.
In an affidavit, bank chief executive Richie Boucher said that, following recapitalisation of Bank of Ireland by the Government in March 2009 and further capital raising measures undertaken by it in March 2010, the Irish National Pensions Reserve Fund Commission (NPRFC) currently holds some 1.83 billion units of preferred stock in BoI, carrying a dividend entitlement of 10.25 per cent per annum.
As a result of these capital raising measures, the capital stock and stock premium account of BoI has increased significantly, Mr Boucher said. The current capital stock of BoI was €1.21 billion and its stock premium account was €5.099 billion.
As a result of the financial performance of BoI at December 31st last, the unconsolidated balance sheet did not contain sufficient distributable reserves to enable the directors declare, if they chose to do so, the next discretionary cash dividend on preference stock held by the NPRFC due in February 2011 and on other preference stock previously issued by BoI, Mr Boucher said.
He said the total cash dividend was expected to amount to €218 million, of which €214 million would be payable to the NPRFC and €4 million to the holders of other preference stock.
If the next instalment of the cash dividend was not paid in full, the NPRFC would become entitled to an issue of units of ordinary stock at least equal to the value of the cash dividend and this would materially dilute the proportionate stockholding of the other ordinary stockholders in BoI, Mr Boucher added.
