Bank of Ireland seeks court approval for reorganisation

Bank of Ireland is seeking court approval of a proposed scheme to achieve a corporate reorganisation of the Bank of Ireland group. The purpose of the reorganisation is to implement the "preferred resolution strategy" for the group as determined by the Single Resolution Board (SRB), the banking resolution authority within the banking union of the EU and the Bank of England, which regulates some activities of the BoI group.

The SRB's objective is to ensure banks are structured so that, should the need arise for them to require additional capital, this can be done without requiring contributions from taxpayers and without undermining the stability of the financial system, Bank of Ireland chief executive Richie Boucher said in an affidavit.

Capital reduction

The proposed scheme incorporates a capital reduction requiring both shareholder and court approval and the proceedings were admitted this week to the Commercial Court by Mr Justice Brian Cregan.

Subject to receiving stockholder approval at a meeting on April 28th at Dublin’s Aviva Stadium, the bank will seek orders sanctioning the scheme and confirming the reduction of capital with a view to the scheme becoming effective in July 2017.

In his affidavit, Mr Boucher said the proposed scheme is to effect a complete re-organisation of the BoI group resulting in a new Irish incorporated company, Bank of Ireland Group plc (BOIG plc).

BOIG will become the 100 per cent owner of the ordinary stock in the bank and ordinary shareholders will receive new ordinary shares in BOIG plc in proportion to their current holding of ordinary stock. The BOI group employs some 11,220 staff, most in Ireland, and had total assets of some €123 billion for the year ended December 31st last, while total liabilities were some €114 billion.

The scheme will have no effect on employees, it was stated.

Mr Boucher said the scheme is of benefit to the bank and its stockholders and is “fair and reasonable”. It would not affect the amount of the bank’s issued share capital and other non-distributable reserves and is not prejudicial to creditors, he said.

The purpose was to implement the preferred resolution strategy for the group as determined by the SRB and BOE. That determination was subject to certain professional secrecy and confidentiality obligations but would be made available to the court if required, subject to arrangements being put in place to protect its confidentiality.

Orderly resolution

The SRB, the regulatory authority established by the EU in operation since January 2015, has responsibility to ensure strategies and mechanisms are in place to facilitate an orderly resolution of any failing bank with minimum impact to the real economy and public finances of the relevant member state.

The SRB and BOE last February notified the group of their joint decision on a BoI group resolution plan which settled on a single point of entry bail-in strategy at a holding company level as the preferred resolution strategy.

That form of strategy means a holding company, which itself does not carry on any banking business, would become the listed parent company of the group, be the primary issuer of its capital instruments and would own subsidiaries carrying on the banking business.

Under the strategy, any re-capitalisation of the group as part of a resolution was expected to initially involve restructuring the capital of the holding company, including the bail-in holders of debt instruments issued by the holding company.

If such a stabilisation phase was required, a restructuring phase would typically follow during which the resolution authorities could execute additional measures to address the root causes of the group’s failure with a view to returning it to profitability and long-term viability.

The Irish Takeover Panel has also provided a derogation from application of Irish Takeover Rules to the scheme.