First Ireland Investment Company is proposing a capital reorganisation designed to reduce the discount of its share price to its net asset value. This would involve the replacement of its existing ordinary shares with new ordinary shares and convertible loan stock units.
Also, the fee payable to its managers, AIBIM, is to be reduced to a flat rate of 0.75 per cent of the company's net assets. This would replace the existing variable rate of 0.75 per cent of net assets up to £30 million and 1.0 per cent of net assets over £30 million a year.
The reorganisation move, First Ireland said, was in response to its concern that the market value of its ordinary shares did not provide a fair reflection of the value of its underlying assets. The net asset value (NAV) was 171p per share on June 30th, 1997, while its share price was 153.5p, or a discount of some 10 per cent.
The company has stated that it believed the discount was due primarily to an excess of supply over demand for the ordinary shares in the market. The proposals involve a reduction of capital and the issue to shareholders of new 1.5p units of convertible unsecured loan stock 2097, which may be redeemed or purchased by the company. At an applicable price of 155p, a holder of 1,000 shares would receive 365 new ordinary shares and 635 units of the loan stock.
First Ireland has noted that it would be under no legal obligation to purchase the convertible loan stock prior to the redemption date but it is "determined to improve materially the relationship between First Ireland's share price and its net asset value by purchasing or redeeming the convertible loan stock at any time following commencement of dealings if necessary to the full extent of the convertible loan stock in issue".
First Ireland's results, for the year ended March 31st, 1997, just released, shows an underlying increase of 24.42 per cent (16.62 per cent in sterling terms). This was just marginally better that the 24.39 per cent increase in the Irish Stock Exchange index. AIBIM is expecting the Irish equity market to grow by about 12 per cent in 1998.
