Lenihan Updates On Bank Of Ireland Recapitalisation Plan

by Jason Gorringe, Tax-News.com, London

31 March 2009

The Irish Minister for Finance, Brian Lenihan, in a statement dated March 27, welcomed the vote of the Extraordinary General Court of the Company of Bank of Ireland in which the Ordinary Stockholders passed all the resolutions required for the government’s planned recapitalisation of the bank to proceed.

Mr Lenihan said: "This recapitalisation is a key step in the government’s structured and considered approach to the unprecedented crisis in global financial markets. The investment, which will strengthen the bank’s capital ratios and facilitate the bank meeting its commitment under the terms of the recapitalisation to grow lending to small and medium sized enterprises and mortgage holders, is essential for the health of the Irish economy as a whole. It is, therefore, in all our interests. It is also consistent with the government’s overall approach to the financial crisis, which has at all times been guided by the twin high level principles of protecting depositors and creditors and the interests of taxpayers."

"In keeping with the principle of protecting the interests of taxpayer, this investment generates a significant return for the state. It includes conditions that the bank will pay interest of 8% on the preference shares, amounting to about EUR280m per annum. The preference shares also have warrants attached giving the state an option to buy shares in five years time at a predetermined price, thereby offering the taxpayer the possibility of a significant return."

Lenihan also informed within his statement that the due diligence report on the company, by the National Pensions Reserve Fund Commission, found no issue of sufficiently high risk that would undermine the purpose of the proposed investment. Therefore, the minister will be directing the National Pensions Reserve Fund Commission with a view to their making the EUR3.5bn investment on March 31, 2009.

Recommended