NORWICH UNION'S Irish policy-holders have borrowed more than £500 million to buy the life assurance group's shares ahead of its flotation on the London stock market next Monday.
The deadline for policy-holders to apply for the discounted shares was 2 p.m. yesterday and was preceded by the biggest rush for shares ever seen in the Republic. Thousands of people converged on an office in Ballsbridge, Dublin, where the application forms were being collected, leading to major traffic congestion.
The company's 150,000 Irish policy-holders are being given free shares and the opportunity to subscribe for extra shares at a discounted price. Yesterday was the deadline for those wishing to buy extra shares, which will be available at 25p below the flotation price. A flood of policy-holders and couriers delivered application forms right up to the deadline. Many arriving said they were buying shares for the first time.
An AIB spokesman said yesterday the bank had lent more than £200 million to its customers, while the Bank of Ireland estimates it has made loans of more than £100 million. Both banks reported strong demand for loans to buy the maximum share allocation under the share offer of up to £112,500. AIB estimates that at least one-third of all loan applications were for around £100,000. Ulster Bank and Anglo-Irish Bank have both advanced around £70 million, while most of the other financial institutions have also lent substantial amounts.
Most banks were offering loans at an interest rate of around 10.5 per cent, typically for between three and 12 months, with most also charging customers an additional arrangement fee of £200 to £600. The bulk of these loans is expected to be quickly repaid. Many policy-holders, particularly those applying for large amounts, will get only a fraction of the specially discounted shares for which they have applied because the overall demand will greatly exceed the number available.
Norwich Union has pledged that at least £800 million worth of shares will be reserved to meet applications from its 2.9 million members, 150,000 of whom are Irish. A further £400 million could also be offered, it said, to meet strong demand for the shares. The company will announce the basis of its share allocation on Sunday, including the price at which the shares will be floated and how many shares each member will get. Investors will be hoping that the strong demand will push the price up strongly.
In London, some investors are already promising to pay 350p for shares, well above the indicated flotation price of between 240p and 290p. There is, however, no guarantee of the price at which the shares will trade, and many who have borrowed heavily will be anxiously awaiting the start of trading on Monday. (Additional reporting by Niall 6 Murchadha)