Ulster rules out €4.4bn mortgage buyback
Published 15/02/2012 | 05:00
ULSTER Bank yesterday ruled out buying back some €4.4bn of securitised mortgages later this year, citing "economic conditions".
The mortgages are part of the Celtic Residential series. Just over half of them could have been bought back by the bank in March, the rest could have been redeemed in June.
In a brief statement to the stock market, Ulster confirmed that it "will not exercise the early redemption option" for any of the notes.
The Irish Independent understands that the cost of funding was the primary concern for Ulster. The bank is paying investors three-month Euribor plus 0.14pc for debt instruments now and will have to pay 0.28pc once the early redemption date passes.
"That's a very good rate for long-term funding -- you'd pay significantly more than that in the market now so that was the primary consideration," said one market source.
While Ulster and other banks can get money from the ECB at a rate of just 1pc a year, the maximum term available is three years.
Ulster's securitisations don't begin maturing until 2047, so they can hang on to the money for at least 35 years.
Ulster will have the opportunity to redeem the notes again at various points between now and their maturities. "The market would have to change a lot before that made sense," one source said.