Monday 20 November 2017

AIB raises €500m in latest Irish bond return success

Donal O'Donovan

Donal O'Donovan

AIB has become the latest Irish name to make a successful return to the bond markets. It raised €500m without the aid of a government guarantee.

The state-owned bank borrowed the money for three years and will pay a rate of 3.125pc interest on the new debt – the same price Bank of Ireland paid to borrow in its return to the markets two weeks ago.

The cash has been raised by issuing so-called 'covered bonds', which are secured on a pool of Irish residential mortgages.

This is the first time that AIB has issued a bond since 2010 and the first time that it has raised money on the markets without a state guarantee since June 2007.

The new bond was almost five times oversubscribed, with 175 individual investors in 29 countries offering to lend €2.3bn.

However, despite that level of interest, AIB opted not to increase the size of the bond.

More than 95pc of demand for the bond came from outside of Ireland, AIB said.


The bank's chief executive, David Duffy, welcomed the deal, including the broad distribution of investors. He said it was part of a phased re-entry to the markets by AIB.

Mr Duffy said the bank opted to issue 'covered bonds' because it is a form of debt that is readily understood by investors.

Finance Minister Michael Noonan commented: "This bond issuance by AIB comes at the end of a very successful month for Ireland on the international bond markets, which has seen significant demand for Irish debt and the NTMA, AIB, Bank of Ireland, Bord Gais and ESB all raise money at competitive rates."

He added that investors were reacting positively to actions taken to return the Irish economy to growth, restore order to the public finances and rebuild our international reputation.

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