Bank of Ireland starts exchange for €1.5 billion of lower tier notes

By Jennifer Chiou

New York, Dec. 8 - Bank of Ireland announced the launch of an exchange offer for up to €1.5 billion of its outstanding lower tier 2 securities denominated in euros, sterling and dollars.

The four series of euro securities combined with the four series of sterling securities and one series of dollar securities have a nominal value of roughly €3.1 billion.

In exchange for the securities, the bank will issue new 13-month government guaranteed senior securities.

The Dublin-based commercial bank noted that the lower tier 2 securities currently trade at significant discounts to their original issue prices, adding that the transaction is expected to be equity accretive.

The offer is set to end at 1 p.m. ET on Dec. 16. Settlement is expected on Dec. 30.

Affected securities include the:

• €419,957,000 of outstanding fixed/floating-rate subordinated notes due 2019, which had an original outstanding amount of €650 million;

• €157.85 million of the €600 million of callable step-up floating-rate subordinated notes due 2017;

• €248.15 million of the €750 million of callable step-up floating-rate subordinated notes due January 2017;

• €1,002,157,000 of 10% subordinated notes due 2020 issued in three tranches;

• $327,671,000 of the $600 million of callable step-up floating-rate subordinated notes due July 2018;

• £155,465,000 of the £400 million of callable fixed/floating dated subordinated notes due January 2018;

• £450 million of callable subordinated step-up notes due September 2020;

• £197,383,000 of 10% subordinated notes due 2020; and

• £75 million of 10¾% subordinated bonds due 2018 originally issued by Bristol & West Building Society and initially substituted by Bristol & West plc).

The new notes include:

• Euro-denominated 6.75% notes due 2012 to be issued by the bank and guaranteed by the Minister for Finance of Ireland for the existing euro notes;

• New euro notes under the ELG scheme for the existing dollar notes; and

• New euro notes or sterling-denominated 6.75% notes due 2012 for the existing sterling notes.

Any tenders for exchange received in excess of the €1.5 billion cap will be accepted on a pro rata basis.

Bank of Ireland said it will determine the allocation of acceptances of each series of notes at its discretion. It added that the purpose of the exchange is to enhance its capital base.

The exchange consideration will be calculated using the exchange ratio as well as the relevant exchange rates for the dollar and sterling notes.

The exchange ratio is 51% for the floaters due 2019, 48% for the two series of floaters due 2017, 56.5% for the 10% euro notes, 46% for the dollar notes, 52% for the sterling notes due 2018, 53% for the step-up sterling notes due 2020, 56.5% for the 10% sterling notes and 57.5% for the 10¾% sterling bonds.

Holders must tender enough notes to reach the minimum offer amount of €50,000 or £50,000 of new notes.

The bank said that it will decide whether it will exercise calls in the future pertaining to any unexchanged notes "on an economic basis," according to a bank news release.

Questions may be directed to Bank of Ireland via Brian Kealy, head of capital management, at 353 76 623 4719, or Colin Reddy, capital management, at 353 76 623 4722.

Deutsche Bank AG, London Branch (44 20 7545 8011) and UBS Ltd. (44 20 7567 0525) are the dealer managers, and Lucid Issuer Services Ltd. is the exchange agent (44 20 7704 0880).

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