IL&P holds off on bond redemption to cut costs
IRISH Life & Permanent has passed up the opportunity to redeem €60m worth of subordinated bonds, prompting market speculation that a further €200m of redeemable bonds will also be left with the market later in the year.
IL&P yesterday confirmed it had decided not to redeem one €50m bond and one €10m bond "in light of the materially higher replacement costs". The bonds are due for final repayment in 2015, but the bank had the option to replace them with new debt now.
Since the financial crisis, banks across Europe have been loath to exercise these 'call options' on bonds, reflecting both the lending environment and the European Commission's tough stance on bailed-out banks repaying bondholders.
"I think it's significant for IL&P in terms of its imminent restructuring," said NCB financials analyst Ciaran Callaghan, pointing out that the plc has "previously alluded to" some form of liability management as part of its recapitalisation.
IL&P has another €200m of debt it can call by the end of the year. It may decide to wait and look to buy it back at a discount, Mr Callaghan added.