Business Irish

Monday 27 March 2017

Bailed-out IL&P borrows against its Irish loans

FINANCE

Laura Noonan

Laura Noonan

IRISH Life & Permanent has become the first bailed-out bank to borrow against the strength of its Irish loans since the financial crisis hit in 2008.

The plc yesterday announced that it had raised €145m in a "secured funding" deal against its Irish car loans book. Market sources described the figure as "modest" but said the deal was still "very significant".

"This is the first time we've seen an Irish bank raising money against its Irish assets," said one source. "That sends a signal."

Irish Life & Permanent's spokesman yesterday declined to say what size loan pool it had to put up to get the €145m, or what rate the bank paid.

It is understood that while the interest rate was "competitive", it was significantly above the 1.5pc the bank pays the European Central Bank (ECB) for liquidity facilities.

"It costs more, but you'd still want to do it to keep the door open to funding channels," one source said.

IL&P, like the other Irish banks, is also mandated to dramatically reduce its ECB funding by 2013.

Yesterday's announcement also included details of a £900m (€1.04bn) fundraising by IL&P against its UK mortgage book, mirroring a similar £1.4bn transaction in August.

The investor in the deal was identified only as an "international investment bank" and no details of price were given.

Bank of Ireland, which has raised £4bn against its UK mortgage book in recent months, paid an average of 2.4pc above the benchmark Euribor rate.

Further significant secured fundraisings by Bank of Ireland and IL&P are unlikely, since they have largely exhausted their supply of assets they could secure money against.

AIB has publicly said it hoped to execute a transaction before the end of the year, but no announcement has yet been made.

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