Written answers

Tuesday, 5 July 2011

Department of Finance

Banking Sector Regulation

9:00 pm

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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Question 169: To ask the Minister for Finance if he will provide figures for the way AIB, BOI, EBS and IL&P are spending on advisers including lawyers, investment advisers and underwriters as part of their efforts to raise the €24 billion committed by him following the latest stress tests; and the measures taken to ensure value for money with respect to this expenditure; and if he will make a statement on the matter. [18683/11]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The financial institutions referred to in the Deputy's question have advised me of the following summary information: Bank of Ireland

On 18 June 2011, Bank of Ireland published a Prospectus which outlined that the estimated expenses to generate the €4.2 billion Core Tier 1 capital and €1 billion of contingent capital required to meet regulatory requirements by 31 July 2011 would amount to circa €150 million. Details of fees payable under the Transaction Agreement (where the NPRFC/Minister for Finance has agreed to underwrite the Rights issue and to subscribe for the potential State Placing and the Contingent Capital instrument) are set out in the Prospectus. BOI has agreed to pay the following fees to the NPRFC and/or the Minister in consideration for the NPRFC and the Minister's obligation under the Transaction Agreement, including the underwriting of the Rights Issue, the State Placing and the subscription for the Contingent Capital instrument:

An underwriting fee of 4% of the gross proceeds of the Rights Issue (including in respect of those securities that the NPRFC is entitled to take up pursuant to its proportionate entitlement);

A placing fee of 1.5% of the gross proceeds of the State Placing;

A corporate finance fee of €3 million; and

A fee of 1.5% of the amount of the Contingent Capital Instrument, i.e. €15 million.

BOI has also agreed to pay all costs and expenses of the State, or in connection with the Debt for Equity Offers, the Rights Issue, the State Placing, the EGC, the entry into the Transaction Agreement, the issue of the New Ordinary Stock and the issue of the Contingent Capital Instrument in the amount of €4 million. In addition, BOI has agreed to pay the Joint Sponsors and the Joint Bookrunners the following fees in consideration of their services under the Transaction Agreement, including in respect or procuring places under the Rump Placing:

A fixed fee of 0.4% of the gross proceeds of the Rights Issue (excluding in respect of those securities that the NPRFC is entitled to take up pursuant to its proportionate entitlement);

An incentive fee of 1% of the gross proceeds of the New Ordinary Stock taken up in the Rights Issue or to the Rump Placing by 31 July 2011, but excluding any New Ordinary Stock subscribed for by the NPRFC pursuant to the Rights Issue, its underwriting commitments or taken up pursuant to the State Placing;

A transaction co-ordinator / financial adviser fee of €4 million; and

A sponsor fee of €1 million.

Bank of Ireland has agreed to pay the Joint Sponsors and Joint Bookrunners' costs and expenses of, or in connection with, the Rump Placing. As in normal procurement matters, Bank of Ireland applied value for money principles in determining the expenses of the capital raising. When it is negotiating fees or expenses, Bank of Ireland takes into account market precedent, benchmarking and includes appropriate incentivisation. Allied Irish Banks

Allied Irish Banks have informed me that, to date, their capital raising fees total circa €6.25 million which includes fees for the bank's Liability Management Exercise. AIB's capital raising is not complete so further unquantified fees will be incurred. The bank has advised that it has and continues to maintain the cost of professional fees in line with market norms. EBS

The EBS has advised that to date, that in the context of its capital raising measures, the company has spent c. €270,000 on legal fees, c. €6,000 on accountancy fees, c. €6,000 on Investment bank and c. €150.000 on trustees/tender agents. EBS advised that the company received fee quotes from a number of investment banks and therefore ensured that fees paid were competitive, indeed the fees charged by the investment bank chosen were lower than all other quotes. Regarding the other advisers, it was more cost efficient to use the previous legal advisors on the transaction as they were familiar with the structure. If other firms had been used it would have cost considerably more. Irish Life and Permanent

Irish Life and Permanent has advised me that to date, it has spent €2 million on lawyers, investment advisors and underwriters as part of the institution's efforts to raise capital. There will be further significant amounts due in relation to the IPO and the disposal of the Life Assurance company and other banking businesses. I am advised by ILP that the institution effectively tendered the business to reputable firms and in some instances set a fixed price on the contacts to ensure value for money and to guard against a potential 'drift' in variable fees.

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