ALLIED Irish Banks returned to the debt markets yesterday for the first time since the crisis hit, raising €395m in bonds secured against UK mortgages.
The deal follows Bank of Ireland and Irish Life & Permanent's successful debt issues last year, and means that all the 'continuing' bailed-out banks have now returned to the markets.
None of the banks have been able to raise money without offering up assets as security, and the latest AIB deal involves significant 'enhancements' to protect the new investors.
The investors are paying €395m for the cash flow from a pool of UK mortgages. AIB will hold €150m of 'junior' notes in the mortgage pool that will absorb the first losses.
Glas Securities analyst Michael Cummins stressed that this arrangement meant that the deal "isn't as simple as" AIB getting money at a given rate.
"AIB retains about 28pc of the equity via a subordinated note, which allows the senior tranches to be AAA rated," said Mr Cummins. "AIB effectively takes the first loss."
This means that the interest rate AIB is paying -- 2.5pc above the London Interbank Offered Rate (LIBOR), or an absolute rate of about 3pc -- isn't as cheap as it might look.
Mr Cummins stressed, however, that "any form of private funding for an Irish bank in the current market has to be deemed positive".
In a statement, AIB chief executive David Duffy described the three-year bond as a "positive return to the markets for AIB" and said the deal "forms part of our longer-term, diversified funding strategy".
"It is also a further indicator of the improving international sentiment towards Ireland and the Irish financial system," he added.
The AIB deal was far smaller than the €4.2bn of funding Bank of Ireland raised against its UK assets last year, or the £1.4bn Permanent TSB raised against its UK mortgage assets last August.
Mr Cummins said this week's deal meant AIB "have a platform [which] they can use going forward if they want to".
The banks are hoping to ultimately be able to raise more mainstream debt on the markets by borrowing on the strength of their core businesses rather than securing debt against UK assets.
Earlier this week, Central Bank Governor Patrick Honohan said he was "not expecting" banks to be able to "access international capital markets on a large scale ahead of the market re-entry of the Irish sovereign itself".
Appetite for bonds secured on Irish mortgages is sparse, but UK mortgages are seen as a better credit risk and the market for those bonds is far larger and more active.