The bank is imposing losses of up to 90 percent on its junior bondholders and launching a government-underwritten rights issue to raise the extra capital demanded of it by Ireland's central bank after stress tests in March
BOI, in which the state already holds a 36 percent stake, said the potential non pre-emptive placing would be priced at 0.10 euros per unit of new stock, a better price than the 0.13 euro the stock closed up at on Friday.
Market sources said the fact that the bank had amended its capital raising plan to issue new stock at an advantageous rate could indicate that it had a private investment lined up to take on the shares.
Finance Minister Michael Noonan spent the last week in the United States meeting potential and existing investors in Ireland.
"We're not certain, but the fact that their advantaging on the price and going down this route suggests that the state believes it has a realistic prospect of securing some private placement," one market source said.
A private placement would give any participant a 15 percent stake in the bank as they would be able to follow their money into the rights issue.
The bank said that if the state takes up the placing, the size of its rights issue would be reduced accordingly while the minimum state ownership scenario it envisaged previously would increase.
It said that a 100 percent take up by bondholders in its debt for equity conversion and a similar take up in the rights issue would leave the state with a diluted stake of 32.8 percent.
Should all the bondholders opt for cash instead and the rights issue attract zero interest, then the state would control 87.7 percent of the bank, BOI said.
Analysts expect a high take up by bondholders of the debt for equity option and a muted response to the rights issue. ($1 = 0.696 Euros) (source http://www.reuters.com ) For the latest updates PRESS CTR + D or visit Stock Market news Today
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