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Dublin: 2 °C Saturday 18 January, 2020

BOI investment deal reduces level of state funding for recapitalisation

A group of investors has agreed to buy up to €1.123bn of the state’s stake in Bank of Ireland, meaning the state is now likely to put €1.7bn into the bank.

Image: AP Photo/Peter Morrison

AN INVESTMENT CONSORTIUM has agreed to buy up to €1.123 billion of the state’s shares in Bank of Ireland, meaning that the bank will not fall into state ownership as Anglo and AIB have done.

Under the deal, the state’s stake in the bank can only reach a maximum of 32 per cent and means that less public funds will be invested in BOI. The deal is subject to regulatory approval.

Minister for Finance Michael Noonan said in a statement this morning that he welcomed the conclusion of the negotiations as “tangible proof of growing international confidence in the future prospects of both Bank of Ireland and the Irish economy”.

The state’s capital contribution to the bank will fall, if the deal is approved, from the €5.2 billion required after the bank stress tests to €1.7 billion. A recent deal with junior bondholders has already cut the bill by an estimated €2.4bn.

The minister said that the state would not have to seek external funding to make this lower recapitalisation payment.

The deal could significantly affect the percentage of shares held by investors, with existing stakeholders holding a minimum of 31 per cent or a maximum of 71 per cent while the new investors can hold from 14 per cent to 37 per cent.

The state’s share would drop to a maximum of 32 per cent, or a minimum of 15 per cent.

Noonan described this morning’s announcement as a “very positive development for the Irish economy” following on from the recent agreement from EU heads of state to reduce Ireland’s bailout loan rate. The investors involved have not yet been named.

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