Sunday 23 October 2016

Bank of Ireland plans convertable bond

Published 09/06/2015 | 02:30

Bank of Ireland HQ, Baggot Street Lower, Dublin 2
Bank of Ireland HQ, Baggot Street Lower, Dublin 2

Bank of Ireland is preparing its first high risk "additional Tier 1" bond, which would convert into shares in any crisis.

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It will be the first "benchmark" or large scale deal of its kind for a bank here.

Permanent TSB raised €125m in additional Tier 1 bonds earlier this year, paying interest of 8.625pc.

Holders of so-called Tier 1 bonds go into the deal knowing they are near the top of the queue to take losses if the bank struggles. Such bondholders don't have an automatic right to dividends or interest payment, which can be switched off if the performance of the borrower struggles and the bonds can convert into shares, even if the borrower is solvent.

Unsurprisingly investors tend to seek higher returns, but regulators regard additional Tier 1 bonds as a solid way of financing banks.

"I think a lot of people have been waiting to see this come so we've already been inundated with calls to meet them," a banker involved in the deal told Reuters.

Bank of Ireland has mandated Deutsche Bank and UBS to manage the deal, with Bank of America Merrill Lynch, Credit Suisse, Davy and Morgan Stanley also supporting the sale.

Irish Independent

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