Bank of Ireland refinancing plans boosted by EBA ruling
DUBLIN (Reuters) - Regulatory clarification around Bank of Ireland 's 1.8 billion euros ($2.5 billion) of state preference shares has given it more flexibility for a key refinancing that may happen in weeks, analysts said on Friday.
The 15 percent state-owned bank faces a March 2014 deadline to refinance the shares before a clause under its state bailout kicks in, increasing the cost of buying them back by 25 percent, or 450 million euros.
The European Banking Authority said on Thursday state-aid instruments such as the preference shares would continue to count as common equity Tier 1 capital if sold to private investors.
Analysts said the ruling by Europe's top banking regulator begins to clear the way for the state to place some or all of the shares with debt investors, and avoid a third major rights issue since 2010.
"Any lingering fears of a large-scale rights issue should now be finally set aside, though an equity placing does remain a possibility," Stephen Lyons, a credit analyst at Davy Stockbrokers wrote in a note.
"The repayment of the state's 1.8 billion euros of preference shares should now conclude pre year-end and continues the process of state divestments following (Bank of Ireland's) 1 billion euro CoCo sale and the 1.3 billion sale of Irish Life."
Bank of Ireland became the only lender to escape full state ownership following an unprecedented property crash after a group of North American investors led by Wilbur Ross and Prem Watsa bought a 35 percent stake just months after Ireland signed up to an EU/IMF bailout three years ago.
The EBA's ruling is the latest in a run of positive news for the bank after its sharp net interest margin rise in the first half of the year beat expectations, it agreed a deal to almost halve a 1 billion euro pension deficit and the state removed restrictions on the use of deferred tax assets.
A spokeswomen for the bank said it noted the clarification given by the EBA and continued to assess a range of options. Chief Executive Richie Boucher said in August that the bank may deal with the issue through a range of solutions.
Analysts said on Friday that one of those solutions would likely be via the issuance of Additional Tier 1 (AT1) capital, an instrument successfully issued in euros for the first time by Banco Popular Espanol last month.
"For credit investors, our recent travels indicate extensive interest in the preference shares," Goodbody analyst Eamonn Hughes wrote in a note.
($1 = 0.7356 euros)
(Reporting by Padraic Halpin; editing by David Evans)
