US hedge funds to block Bank of Ireland restructuring, says WSJ

A number of US hedge funds with large stakes in Bank of Ireland's subordinated debt are to fight the Irish government's restructuring proposals for $2.6 billion of the ailing bank's junior debt, reports the Wall Street Journal. 

The funds, which claim to hold up to a third of the bonds, have hired Thomas Lauria, the head of White & Case's restructuring practice, to respresent them. The group of hedge funds has offered an alternative plan in which they would directly invest equity in the bank, and get more for their bonds, says the Wall Street Journal.

As part of the Irish government's proposals, bondholders taking up the offer would receive 10% of their holdings' nominal value in cash or could alternatively opt for equity worth 20%, with junior bondholders told to expect a stock offer of somewhere between 11.3 and 11.8 euro cents, compared to a closing price yesterday of 14 cents, if they take the equity option.

Bank of Ireland is the only Irish bank to not yet have fallen into majority state ownership, with the bank yesterday warning that if these proposals are not accepted the state's stake could rise to 87%, meaning the bank would have to delist from the main Dublin and London stock exchanges. The Irish government will buy any shares not taken up by investors at a price of 10 cent a share in the rights issue up to €2.2 billion, in a move which could potentially see its shareholding rise significantly from its current level of 36%.