Government's stake in AIB and BOI

S

Shawady

Registered User
Messages
944
Can someone clarify what the position is regards the government's stake in BOI and AIB?

Is it the case that the government gave each bank €3.5 billion on the basis that if this is not paid back in 4 years, then it takes a 25% stake in the bank.
Also, this €250 million worth of shares (16%) has now been taken instead of cash. How does that work? Is it volume of shares that is equvilant to value of €250 million at todays market price and that these can go up or down over time, so we may end up getting less than 250 million back?
 
The amount of shares granted is equivalent to €250m based on the average share price over the past 30 days.
 
Sunny said:
The amount of shares granted is equivalent to €250m based on the average share price over the past 30 days.
Click to expand...

What about the 25% stake? I initially thought the government had taken a 25% stake in each bank but reading over the weekend it appears that it has the option of taking a stake in the event that the bank cannot pay back €3.5 billion in a few years time. Is this the case?
 
Shawady said:
What about the 25% stake? I initially thought the government had taken a 25% stake in each bank but reading over the weekend it appears that it has the option of taking a stake in the event that the bank cannot pay back €3.5 billion in a few years time. Is this the case?
Click to expand...

Yeah its just an option. They can excerise the option at anytime between year 5 and 10 from the date of the investment. I think the strike price is at about 60c per share or something.
 
Sunny said:
Yeah its just an option. They can excerise the option at anytime between year 5 and 10 from the date of the investment. I think the strike price is at about 60c per share or something.
Click to expand...

Thanks for clarification.
I just wonder that they are very relucant to go down the road of nationalisation and if they have to do it eventually , would they have been better off biting the bullet at the start.
 
I can why they didn't but it is getting very messy at this stage. To be honest, the amount of time all this is taking is amazing. I can understand NAMA to an extent from a logistical point of view but I don't understand why the banks are still waiting for EU approval for their businss plans. By European standards, they are not big or complicated.
 
The 3.5bn injections were to purchase preference shares, not ordinary shares.

The pref shares have an 8% coupon.

If the 8% is not paid in cash, then it may be paid in ord shares.
 
Yes, there is a major risk involved. What has effectively happened within just one day of trading is that the shares, which were 'bought' at EUR1.36 are now worth EUR1.18 or less. If the government were to sell its stake now for even close to this price, then it would make an instant loss of over 36M Euro. (The 250M would now be worth around 214M).
 
And if I sold my house today, I would make a loss but I am not going to do that. The transaction is messy as both sides didn't want to do it but as Prof Honohan pointed out, BOI needed capital anyway so now it just means they will need €250m less
 
The government are never going to sell these shares. They have effectively foregone the 250m in cash.
 
shanegl said:
The government are never going to sell these shares. They have effectively foregone the 250m in cash.
Click to expand...

Hopefully NTMA will sell them in a few years, at a profit! It will take a lot longer for me to make a profit on mine!!!
 
'hopefully' is the correct word. I can't remember anyone giving the government the right to do this on any Irish person's behalf. At the moment they are in far too deep and have to keep on digging. If only they had never started this process, everyone would be so much better off.
 
Slim said:
Hopefully NTMA will sell them in a few years, at a profit! It will take a lot longer for me to make a profit on mine!!!
Click to expand...

Well they've already sunk a few billion into BOI, and plenty more needed to nationalise them and recapitalise soon enough. Never mind the enormous cost of NAMA.

Don't see much upside on this latest investment.
 
You must log in or register to reply here.
Back
Top