BoI holds talks with Middle East investment funds
09 January 2011 By Cliff Taylor
Bank of Ireland has held discussions with a number of Middle Eastern sovereign wealth funds about their possible involvement in its forthcoming fundraising.
The bank must raise more than €2 billion to meet new capital rules, and any cash it can raise from private sources will reduce the likely future state shareholding in the bank.
Bank of Ireland’s discussions are p art of a wider move to attract Middle Eastern cash into the Irish banking system. A senior delegation of National Treasury Management Agency (NTMA) officials is understood to have visited the region in recent weeks to discuss the general possibilities of investment in the sector here through taking equity stakes, or the provision of funding by buying bank debt.
Separately, Bank of Ireland is understood to have had contact with a number of possible sovereign wealth investors as part of its efforts to raise €2.2 billion in fresh capital to meet new rules due to come into force by the end of next month.
The bank has already raised €700 million from a debt swap programme and is striving to raise as much as possible of the remainder of the funds from private sources.
With many shareholders having lost heavily after participating in the bank’s last fundraising, its best hope of new private capital may come from foreign investors interested in taking a significant minority stake as a long-term investment.
The fundraising by Bank of Ireland and the effective nationalisation of AIB are part of a fundamental restructuring of the banking system.
NTMA officials and the Central Bank are urgently discussing ways to shift assets off bank balance sheets to reduce them in size.
Patrick Honohan, governor of the Central Bank, has also indicated that he hopes to see more foreign investment in the banks here, which could ultimately lead to a takeover of one or both of the big banking groups.
In the short-term, however, strategic investment from the Far East or Middle East is seen as the most likely option.
With Chinese investors concentrating their fire elsewhere in Europe, considerable effort has been put into discussions with Middle Eastern sovereign wealth funds about the options of investing here, either directly or via buying bank debt to ease their funding position. |
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