[30 second version – the Government has today sold €1bn of its stake in Bank of Ireland in a deal first announced at around 11am this morning where the stake to be sold was put at €500m to €1bn. This is the first the public has known of the sale. It’s a very large State transaction, and there has been little if any political oversight. There is now reporting that the full €1bn has been sold, but we don’t yet have further details including price]
You would have thought that the September 29th, 2008 bank guarantee would have taught us a lesson – a rushed overnight decision which has wrecked catastrophe on this State, but no, we – or rather, “they” – still make truly colossal decisions and the rest of us learn about them after the event. This morning at 11am, we learned that the Government was selling part of its investment in Bank of Ireland.
In July 2011 the State purchased €3 billion in Contingent Capital Notes in these banks (€1.6 billion in AIB, €1 billion in Bank of Ireland and €0.4 billion in Permanent TSB) as part of the recapitalisations. These Contingent Capital Notes are subordinated Tier 2 debt instruments with a five year and one day maturity and are convertible into ordinary shares in the event of the bank’s Core Tier 1 capital ratio falling below 8.25%. The Notes carry a fixed mandatory interest rate of 10% of the issue price payable annually. The first of these payments which total €300.273 million was made to the Exchequer in July 2012.
What was announced this morning was that negotiations “had concluded” on the sale of the €1bn of Contingent Capital Notes in Bank of Ireland. Apparently some un-named banks were handling the sale and this morning, all we were told was that between €500m and €1bn would be sold. This afternoon, the Irish Times, not the Department of Finance, is reporting that €1bn of the notes have been sold, but there is no further information, the buyers, the price, or really how we know that now was an appropriate time to sell and that we got a good price that reflects the 10% annual interest rate in a State which is otherwise paying less than 5% for long term borrowing.
The sale will come as news to most of the 166 TDs in the Dail.
When did we allow democracy and political oversight of State decisions to deteriorate to this extent?
There will be updates and analysis here as we get any more information.
UPDATE: 9th January, 2013. Snippets of detail continue to leak out. Minister for Finance Michael Noonan has issued a statement welcoming the sale, indicating the sale price was €1.01bn plus accrued interest which will be about €50m from June 2012 to January 2013. It is being claimed that Ireland made a profit of €10m on the disposal. You can watch Minister Noonan’s statement on video here. Bank of Ireland has issued a statement on the mechanics of the transfer to the new owners here. There were bids totalling €4.8bn for the €1bn of notes.