Monday 11 November 2019

AIB secures low cost funds with revived covered bond deal

Bank has boosted its capacity for lending.
Bank has boosted its capacity for lending.
Donal O'Donovan

Donal O'Donovan

AIB raised €750m at a record low cost yesterday as it boosted its capacity for new mortgage lending.

The bank borrowed for seven years at a yield, or effective borrowing cost, of 0.748pc.

The debt is secured on a pool of mortgages. The new "covered bond" debt was issued by AIB Mortgage Bank under the Irish Asset Covered Securities legislation.

It was the bank's first bond deal of 2015, and the first since AIB pulled a planned deal in November.

The latest AIB deal was heavily over subscribed, with lenders offering to lend €2.25bn to the bank - a multiple of the amount that the bank was seeking to borrow.

In a statement AIB said the deal was "well received" and the debt was placed with around 125 investors from 21 countries.

The deal is part of a strategy to "extend maturities and to diversify our funding and investor base", the bank said. Earlier this month Bank of Ireland paid just over half a per cent to borrow on the markets yesterday, when it issued €750m of bonds secured on Irish mortgages.

Investors offered to lend Bank of Ireland €1.6bn.

The coming 12 months are set to be a busy period for AIB.

The Government is looking to begin recouping a share of the €21bn cost of bailing out the lender through a phased sale that is tipped to begin later this year.

That process could be slowed however, following the surpise announcement this month that AIB chief executive David Duffy is to leave the bank to take up a new job at Clydesdale Bank in the UK.

Efforts to find a replacement bank chief are already under way.

Bookmaker Paddy Power has offered odds of 6-1 on Bank of Cyprus boss John Hourican, a former Royal Bank of Scotland Group executive, taking up the job.

Irish Independent

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