Séamus Healy (Tipperary South, Workers and Unemployed Action Group)
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141. To ask the Minister for Finance in view of the fact that any option to sell the preference shares to third party investors is a decision for the State alone, if he has decided to sell any of the preference shares held by the State in Bank of Ireland to third party investors; if he has, the portion of the preference shares that will be sold to third party investors; in view of the fact that the value of the preference shares to the State will automatically rise by 25% next March, the way such a sale serves the interests of the Irish people; and if he will make a statement on the matter. [52883/13]

Michael Noonan (Limerick City, Fine Gael)
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Last Wednesday, December 4th, after your question had been submitted Deputy; I announced the successful exit by the State from its €1.837 billion of Preference Shares held in Bank of Ireland.

The State has received 100% of par value on €537 million of the securities which the bank was entitled to redeem through the issuance of new equity and secured a price of 104.75% of par on the remaining €1.3 billion of preference shares which were sold to investors following a book build exercise by a consortium of banks.

The successful exit by the State from its Bank of Ireland Preference Shares is a very positive and welcome development and sees the State recoup circa €2.05 billion from this investment. These proceeds comprise the return of our principal which is €1.837 billion, a profit of €62 million, and accumulated interest of €151 million.

The Preference Shares, which date back to early 2009, form part of the €4.7 billion total investment made by the State in Bank of Ireland. Under the terms of the Preference Shares, the Bank was entitled, subject to regulatory capital considerations, to redeem the Preference Shares at any time. Therefore, a decision to hold onto the Preference Shares could not be made unilaterally. The step-up only crystallised in circumstances where the Bank was unable to redeem the Preference Shares before 31st March 2014. In this transaction the bank exercised its legal right to redeem up to €537m of the shares at par while the State took the decision to sell the balance of €1.3 billion for a premium.

In deciding whether to support the transaction the State had to assess the probability that the Bank might opt to execute a rights issue and use the proceeds to redeem all the Preference Shares at par. In this scenario, the State would have foregone this €62m profit. I was aware when making this decision that market conditions were extremely favourable at this time, enabling us to maximise the return to the State.

Following this transaction the State will have recouped a net positive cash return of circa €1.1 billion from its overall investment and support to the bank.

This net cash return is before account is taken of our continuing equity investment in Bank of Ireland which is worth a further €1.2 billion at current market prices. This value takes account of the issuance of new shares to investors, which will see the State's equity stake fall from 15.1% to circa. 14.0%. Hence the State expects to record a significant profit from its total support of and investments in Bank of Ireland.