If you are one of the 95,000 Bank of Ireland private shareholders, you should have received your share rights offer prospectus by now from the bank.
It is aiming to raise another €2.94 billion, slightly more than the minimum new capital requirement of €2.66 billion set for them by the Financial Regulator.
You have until June 8th to take up your rights to buy the discounted shares which cost 55 cent a share, a 64.1 per cent discount, on a three shares for two you already hold, basis.
There are earlier deadlines if you wish to take up just some of the shares and sell the remaining rights, to sell your rights to the shares altogether or to do nothing, whereby your rights will be sold after the shares begin to trade. Check the prospectus for these deadlines.
If you have the ‘average’ number of shares (5,000) that are worth €7,670 based on the closing share price of May 14th (ie €1.53), taking up this rights issue – which dilutes your holding – will cost you €4,125 just to maintain the existing value of your shares.
There is quite a complex calculation involved in determining the new price, but suffice it to say that before you agree to spend any more money you need to satisfy yourself that:
(A) The bank now has the ability to reinvent itself into a smaller, more prudent domestic bank
(B) It can still make steady profits in the short to medium term in our heavily indebted economy and
(C) It will someday be able to deliver decent profits and dividends to the ordinary shareholders.
It should be noted that here will be no dividends paid until at least the end of September 2012; meanwhile, the bank will try to pay the agreed 10.25 per cent dividend to the state for its huge cash bail-out.
See The Munster Express newspaper for full story.