By Julian Hofmann, 22 June 2011
The Bank of Ireland's permanent interesting bearings shares (Pibs) are the latest casualties of the country's spectacular property bust. Holders of its subordinated debt have been given a take-it-or-leave it offer of 20p in the pound to redeem the debt. Those holders include investors who bought Bristol & West Pibs when the entity was still a building society.
Bristol & West was taken over by Bank of Ireland in 1997, a transaction that made BoI the ultimate holder of all of the building society's liabilities. The old Bristol & West was a typically dull, cautious institution that amassed savings and lent out money for B&B's and holiday homes in the south west of England.
That innate conservatism meant many pensioners and small investors felt confident enough to buy the Pibs for their solid income - issued in a more inflationary era, they boasted a coupon of over 13 per cent - and this disgruntled group is the driving force behind a legal action against the Bank of Ireland (BoI). The rebel investors now have until July 5 to vote on whether to accept the BoI's offer - originally this would taken place this week but for a successful court order.
Their concerns will be familiar to others who've endured capital restructurings involving Pibs and preference shares: the timescales are very tight, especially for those who hold certificates, and more importantly, holders of smaller amounts are effectively shut out of an equity offer that sweetens an otherwise bitter pill. They also complain that the restructuring is all part of a broader political agenda within Ireland to make bondholders pay for clearing up the mess Irish banks made of their business.
Thet BoI restructuring follows a disturbing and unwelcome pattern set by previous ones, say analysts at Collins Stewart. First came profit participating deferred share (PPDS) - these were issued by West Bromwich Building Society in exchange for the subordinated debt in the society. They receive up to 25 per cent of West Bromwich's profits, at the society's discretion, but have no specific maturity and weaker capital rights. Next up were the 'contingent convertibles' used by Lloyds in its controversial balance sheet restructuring, in which holders of several pref share series lost out badly.
■ The holders of BoI Pibs have set up an action group at www.protect-my-savings.co.uk.
visible-status-Public story-url-Bond news.xml