The Bank of Ireland (BoI) has cancelled plans that could have seen savers holding £75m in bonds issued by the old Bristol & West building society lose at least 80 per cent of the face value of their holdings.
The BoI had asked holders of the so-called permanent interest bearing shares (pibs) issued by Bristol & West, which it bought in 1997, to hand them over for 20 per cent of their face value or risk losing up to 99 per cent under a restructuring connected to the bank's bailout by the Irish government. Many of the investors in the pibs are pensioners who look to the bonds' 13.375 per cent interest rate for income.
But yesterday, the state-rescued lender said it was terminating the move with immediate effect, and that it would come up with a new offer. "In so doing, the bank will seek to address the unique difficulties that have been highlighted," it said.
Separately, BoI also confirmed that it had come to a resolution in a legal action connected to the now-terminated proposal. In a test case for the estimated 2,000 British pensioners affected by the move, pib-holder Albert Kepmster, 73, was taking the BoI to the High Court over the restructuring, with a hearing due today. But yesterday, the BoI said that "proceedings have been resolved to the parties' mutual satisfaction".
The restructuring was part ofan attempt to raise the €4.2bn in additional reserves to boost the capital cushion, or core Tier 1 capital ratio, that the BoI- needs to find by the end of July following stress tests in March.
It has already raised around half of the extra funds needed from junior bondholders who took part in a debt swap offer. The BoI, which is part-owned by the Irish taxpayer, is also launching a government-backed rights issue to raise the balance of the required capital.