BANK OF Ireland secured temporary approval from the European Commission for recapitalisation of up to €5.35 billion by the State ahead of yesterday’s extraordinary general meeting. The commission’s final approval of the State recapitalisation depends on the submission of an updated restructuring plan by the end of this month.
Approval is conditional on ensuring a return to long-term viability, an adequate participation by shareholders and subordinated bondholders and proper measures to limit the distortion of competition by the State support.
The latest recapitalisation was “necessary to increase the bank’s solvency ratios and maintain confidence in the Irish financial markets”, the commission said.
Bank of Ireland’s efforts to raise €4.35 billion in cash are being underwritten by the Government, which is providing a further €1 billion in contingent capital.
The bank received a €3.5 billion capital injection from the Government in the first bailout in 2009.
Shareholders approved the proposed rights issue, closing on July 26th, at yesterday’s egm in UCD.
Meanwhile, sellers of insurance against a default by Bank of Ireland will have to pay out to subordinated bondholders over the bank’s actions against the debt investors.
Following a ruling by the International Swaps and Derivatives Association, the body which monitors trading in the insurance, sellers of credit default swaps will have to make payments to debt investors who bought insurance.
The net notional value of credit default swaps in Bank of Ireland is $457.8 million, according to data from the Depository Trust and Clearing Corporation.
Sellers of insurance against default have already been forced to pay out over actions against subordinated bondholders at Anglo Irish Bank and AIB. Following a ruling last week, investors in credit default swaps in Irish Life Permanent will also have to pay out to bondholders.
The Government is seeking to raise about €5 billion of the latest €24 billion recapitalisation of the banks by forcing losses against subordinated bondholders. – Additional reporting Reuters
