Re: The Government were right not to nationalise AIB and Bank of Ireland
Warrants attach to the Preference Shares that can be converted into ordinary shares at discounted strike prices. These warrants can only be exercised after 5 years and within 10 years.
Conversely, the banks has the option to buy back the preference shares at par within 5 years and at 125% of par after 5 years.
As such, it a mechanism to encourage the banks to raise new capital, and not really an ownership mechanism.
That said, the arrangement does allow the State the right to appoint Directors, so it retains some of the benefits of ownership.
However, it can't be seen as an investment in the normal sense of the word. Furthermore, the banks may well use the NAMA funds to immediately buy back the preference shares, which would immediately reduce the NAMA bill by €7bn.
Kaplan - That was my original understanding as well. But I have seen quite a few people claiming that we own 25% of the banks so we will benefit from the uplift. If the banks can buy back the preference shares, so our warrants diappear?
Warrants attach to the Preference Shares that can be converted into ordinary shares at discounted strike prices. These warrants can only be exercised after 5 years and within 10 years.
Conversely, the banks has the option to buy back the preference shares at par within 5 years and at 125% of par after 5 years.
As such, it a mechanism to encourage the banks to raise new capital, and not really an ownership mechanism.
That said, the arrangement does allow the State the right to appoint Directors, so it retains some of the benefits of ownership.
However, it can't be seen as an investment in the normal sense of the word. Furthermore, the banks may well use the NAMA funds to immediately buy back the preference shares, which would immediately reduce the NAMA bill by €7bn.