Bank of Ireland has terminated its offer to swap £75 million (€84.3 million) of its bonds a day before a London court was due to start hearing a legal challenge to the transaction.

The lender said it was ending its offer to swap its 13.375 per cent perpetual unsecured bonds for cash or equity with immediate effect after some owners of the securities had "procedural difficulties" in taking part in the exchange.

By the close of business on June 24th, about 12 per cent had accepted the offer, which imposed an 80 per cent discount on bonds exchanged for cash, and 60 per cent for those swapped for equity.

"This contrasts with an overall participation level to date of approximately 74 per cent of eligible holders across all other series of existing securities which are the subject of the offers relating to those existing securities," the bank said.

In a statement today, the bank noted that bond holders outside the clearing systems may have found it "difficult to participate efficiently" in the exchange offers.

Bonds already tendered in the offers will be returned to the holders, it said.

"The bank currently intends to instigate a new offer to holders," it said today in a statement. "In so doing, the bank will seek to address the unique difficulties that have been highlighted to date with regard to participation in the terminated offers."

Bank of Ireland was facing a court challenge from a bondholder contesting the exchange of the securities, originally sold by the Bristol and West Building Society in 1991. They became obligations of Bank of Ireland when it bought the former mutual lender for £600 million in 1997. The bank said today it had resolved the legal challenge.

Shares in Bank of Ireland were 4.3 per cent higher at 12.2 cent on the Dublin market this afternoon.

Additional reporting: Bloomberg