(Repeats to fix dateline)
* Irish Fin Min says sale gives strong international signal
* Deal will reduce state's recapitalisation bill by 1.1 bln
* Bank of Ireland shares up 8.9 percent
By Conor Humphries and Padraic Halpin
DUBLIN, July 25 Ireland sold a 1.1 billion euro
($1.6 billion) stake in Bank of Ireland to a group of
unidentified investors on Monday to keep the country's largest
bank out of state hands and provide a rare boost to a battered
sector and bruised economy.
The government had been widely expected to take control of
Bank of Ireland, the last domestic lender outside of state
ownership, after it agreed to underwrite a rights issue, the
results of which are due on Tuesday.
However -- after the sale and rights issue -- the government
will now own maximum 32 percent in the bank while new investors
will hold between 14 and 37 percent, the finance ministry said.
"It has been recited far and wide that it is impossible for
Ireland to get money on the markets," Finance Minister Michael
Noonan told national broadcaster RTE.
"Now we have significant private sector investors prepared
to put money into Bank of Ireland and that's a strong signal
It is the second significant boost for the Irish government
after European partners last week agreed to cut the rate it is
charging for a multi-billion euro bailout by 2 percentage
points, a change Dublin says could save it up to 1 billion euros
Dublin, which has closed two of its six domestic lenders,
merged another two state-controlled institutions and will soon
take over a fifth. It has put a 70 billion-euro price on drawing
a line under its banking crisis after stress tests in March.
Bank of Ireland was told to raise 4.2 billion euros in
additional core tier one capital following stress tests in
March. The tests were required under the terms of the 85-billion
euro EU-IMF bailout Ireland received late last year.
The state has shrunk the bill for bailing out its banks by
around 5 billion euros by sharing losses with subordinated debt
holders. Bank of Ireland raised 1.96 billion euros by hitting
junior bond holders with losses of up to 90 percent and expects
to secure another 510 million from further burden sharing.
The bank's shares, which reached nearly 12 euros in early
2007 when Ireland's property boom was at its height, cost 11
euro cent on Monday, up 8.9 percent on the day.
"Foreign investment in Bank of Ireland is an important
milestone for the government... It sends a positive signal to
the market after what has been a fairly miserable 18 months for
the Irish banking sector," Dublin-based Glas Securities wrote in
RIGHTS ISSUE BOOST
Under Monday's deal the investors will initially purchase
241 million euros worth of the state's shareholding. They will
then purchase the remainder of up to 882 million euros after
regulatory approvals. In all they will purchase 4.2 billion
Noonan said the identity of the investors should be known by
Friday. Local media have said private equity firm TPG Capital
held talks with the bank and that a Chinese entity and a
Canadian investment fund were also interested.
Depending on the results of the rights issue, Ireland will
end up with between 15 and 32 percent of the bank. Existing
shareholders will hold between 31 and 71 percent and the new
investors will hold between 14 percent and 37 percent.
While analysts still expect a weak take-up of the 10 euro
cent a share, 18-for-5 rights issue rights issue -- the bank's
second call on shareholders in the space of a year -- the share
sale may help nudge interest up a little.
"With many investors likely to have waited until the last
moment to make their decision, it is possible that the level of
take-up may nudge upwards as investors get enthused by interest
shown in the bank," said Eamonn Hughes, analyst at Goodbody
($1 = 0.696 Euros)
(Editing by David Holmes and Sophie Walker)