BANK OF Ireland has sought a court order confirming an €800 million reduction in its stock premium fund in order to pay a €214 million dividend to the State’s National Pension Reserve Fund as provided for in the scheme to recapitalise the banks.
Paul Sreenan SC, for the bank, yesterday applied to Mr Justice Peter Kelly to transfer to the Commercial Court the bank’s petition for the fund reduction.
The court was told the reduction had no adverse implications for the bank’s solvency, would not prejudice the rights of its creditors or members, and, after reduction, the balance in the stock premium account would be €4.299 billion.
The judge made directions for the advertising of the petition, and fixed the matter for hearing on November 26th.
In an affidavit, Bank of Ireland chief executive Richie Boucher said that, following recapitalisation of the bank by the Government in March 2009 and further capital-raising measures in March 2010, the National Pensions Reserve Fund Commission now held 1.83 billion units of preferred stock in Bank of Ireland, carrying a dividend entitlement of 10.25 per cent per annum.
As a result of these capital-raising measures, the capital stock and stock premium account of the bank has increased significantly, Mr Boucher said. The current capital stock of the bank was €1.21 billion and its stock premium account was €5.099 billion.
He said as a result of the financial performance at December 31st last, the unconsolidated balance sheet did not contain sufficient distributable reserves to enable the directors declare, if they chose to do so, the next discretionary cash dividend on preference stock held by the pensions commission due in February 2011 and on other preference stock previously issued by the bank.
He said the total cash dividend was expected to amount to €218 million, of which €214 million would be payable to the commission and €4 million to the holders of other preference stock.
Mr Boucher said if the next instalment of the cash dividend was not paid in full the commission would become entitled to an issue of units of ordinary stock at least equal to the value of the cash dividend, materially diluting the proportionate stockholding of other ordinary stockholders in the bank.
