BofI in plans to avoid ceding majority control

BANK OF Ireland, ordered by regulators to raise €2.2 billion by the end of February, is weighing plans to avoid ceding majority control to the Government, two people with knowledge of the talks said.

Bank of Ireland may opt to issue a security to the Government that would boost the company’s so-called regulatory capital, said one of the people, who declined to be identified because no decision has been taken. That security would only convert into ordinary stock if the bank failed at a later stage to raise the same amount in a rights offering, the person said.

The plans are still at an early stage. The Government already owns 36 per cent of the lender, and Minister for Finance Brian Lenihan has said it will provide more capital if needed.

Analysts say the bank may struggle to raise money in a rights offering because the Central Bank won’t complete its review of lenders’ capital and liquidity until March, after the regulator’s deadline.

“It is difficult for any investor to price the risk without a proper insight into the upcoming capital and liquidity tests,” said Michael Cummins, an analyst at Glas Securities, a fixed income firm.

Dan Loughrey, a spokesman for Dublin-based Bank of Ireland, declined to comment other than to reiterate that the lender “intends to generate the required capital through a combination of international capital management initiatives, supported from existing shareholders and other capital market sources.” – (Bloomberg)