BoI sale of €200m bonds 'the most significant yet'
Published 13/12/2012 | 05:00
BANK of Ireland sold €200m of subordinated bonds yesterday in a surprise move which many analysts described as far more significant than other recent bond sales.
It is the first time any Irish bank has issued subordinated bonds since the crisis began in 2008.
Subordinated bonds carry a higher risk than other bonds, and some investors in this class lost significant sums when Irish banks collapsed during the crisis.
Reflecting this risk, Bank of Ireland's latest subordinated bonds will yield investors 10pc every year over the next decade.
The bank, led by chief executive Richie Boucher, said investor feedback was very positive and the order book was oversubscribed at three to four times the amount that was sold.
The high coupon "is indicative of the still fragile nature of the Irish banking system" said Owen Callan, a Dublin-based analyst with Danske Bank.
"Given that this class of bond suffered significant losses during the crisis and was not protected by the Irish Government, it's encouraging that investors are willing to get involved in this market once again."
Yesterday's sale comes a month after Bank of Ireland took another step to self-sufficiency by raising €1bn on the sale of a covered bond, its first public bond sale in two years.
In October, it raised €1.1bn from the private sale of bonds secured on its UK residential mortgage book.
The difference yesterday was the money was not backed by government guarantees or mortgage books.
"This is further evidence of International markets' confidence in Bank of Ireland and Ireland Inc," the bank said in a statement yesterday.
"It also marks another important step for the bank in returning to a more normalised funding position."
NCB Stockbrokers described the move as a "positive surprise" and speculated that it was driven by investor demand.
"We suspect that Bank of Ireland is likely to have received a significant lead order, most likely a reverse enquiry," said NCB's Philip O'Sullivan.
Mr Callan said he believed yesterday's sale was "the first issue of genuinely new subordinated debt by the Irish banks since the crisis began, and probably the first since as far back 2005."
The bonds, which were sold in units worth €100,000 each, would be ranked equally with all other subordinated bonds if Bank of Ireland were wound up. The bookrunner was Deutsche Bank.