Bank of Ireland is intent on raising 4.2 billion euros, or $6.1 billion, in fresh capital, the bank said on Friday, announcing plans to issue up to 2.2 billion euros in new stock as it offers to buy back debt using both equity and cash.
However, that buyback will come at a steep discount: in attempting to assure its rescue, the bank plans to offer only 10% of the value of securities if it pays bondholders in cash, or 20% if bondholders will accept an equity alternative.
Reuters reported that the move sent the bank's stock dropping by as much as 22%. The Irish government holds a 36% stake in the Bank of Ireland, which is the only lender in the country that managed to avoid a majority takeover by Dublin when most of the banking sector was nationalized to avoid collapse.
In a statement, the bank said the terms of the Liability Management Exercise (LME) reflect the Minister for Finance's “objective of ensuring subordinated debt holders contribute a significant element of the bank's core tier 1 capital requirement of 4.2 billion euros."