State set to take 99pc stake in IL&P
Bank of Ireland will be the only bank in Ireland left on the main Irish market from next month as it looks increasingly likely that the State will take yet another financial institute into its control.
Calling an emergency general meeting, Irish Life & Permanent said it had no alternative but to take cash from the Government in exchange for a 99pc stake.
The bank needs to raise €3.8bn in capital to meet Central Bank requirements.
Shareholders will vote on proposals to issue the Minister for Finance up to €3.4bn in ordinary shares and €400m in contingent capital notes.
Once the proposals are passed at the July 20 EGM, the bank will move from the main market listing to the junior market, the ESM, where AIB currently trades.
In a detailed circular to shareholders, the board of IL&P said at the end of April loss-making tracker mortgages accounted for €16.7bn, or 65pc, of the Irish mortgage book and €7.1bn, or 98pc of its UK book.
Despite its woes, Finance Minister Michael Noonan has said that once it is “radically restructured”, IL&P will ensure competition in the Irish banking system.
Separately, a group of “rebel” shareholders will put forward their own proposals for a change to the recapitalisation programme.
The shareholders, led by Malta-based investment fund Scotchstone Capital, had been seeking an extension of the July 31 deadline for the recapitalisation and the appointment of an investment bank advisor to review the process. The group also disagrees with plans to sell the group’s profitable insurance arm, Irish Life.
However, in the circular yesterday, the board said it had given the matter “the most careful consideration” and taking in legal and financial advice, it said the proposals made at the AGM are in the best interests of the company as a whole given the lack of alternative options available to raise the required capital by the end of next month.
It added that if the proposals were not passed then the Minister for Finance would invoke the Credit Institutions (Stabilisation) Act 2010 to ensure that Irish Life & Permanent plc would be able to meet its capital requirements if shareholders do not approve the measures proposed.
“The timing of any such intervention would be at the discretion of the Minister for Finance and the Irish High Court and therefore not within the control of the Directors,” they added.
Shares in Irish Life & Permanent have now falled to a record low of just 3cent, losing almost half of their value since yesterday.