Business Irish

Friday 18 October 2019

AIB ready for market return after filing updates with Central Bank

Donal O'Donovan

Donal O'Donovan

AIB looks set to return to the markets after filing updated bond prospectus documents with authorities in the Central Bank and with the Companies Office over the past weeks.

The bank has raised €1bn on the markets in two deals since November but like all Irish lenders is under pressure to resume regular debt issuance as part of the hoped for "normalisation" of the banking sector before the end of the bailout in December.

Papers filed with the Companies Office on May 7 mean the bank has now laid the groundwork to issue new bond deals based on an updated Prospectus that incorporates AIB's accounts for the year to the end of December 2012 and its auditors report from March 2013.

The Central Bank approved the supplemental prospectus on April 1, and the papers were signed off on by the bank on May 1, Companies Office records show.

The updated Prospectus means the bank is in a position to act quickly to issue bonds at short notice to the market.

In November, the bank issued its first covered bonds since the banking crisis last November in a deal that was launched within weeks of filing AIB's mortgage unit filing its original Bond Prospectus.

Surge

The window for such issuance may be narrowing.

Some analysts are concerned that the opportunities for banks and others to borrow cheaply because of a surge of cash into the system could end if the economic situation starts to improve.

"With yields so low any uptick in news flow may be a signal that the bull bond market is coming to a close. Ironically the first real test of low bond yields might be if the economic data starts to suggest signs of a stronger, more sustainable recovery," analyst Gary Jenkins said yesterday. .

AIB Mortgage Bank's covered bond programme allows the bank to issue as much as €20bn of debt secured on pools of home loans.

These so called covered bonds are seen as less risky by investors than lending directly to a bank on an unsecured basis.

Cash raised would likely go towards reducing the banks reliance on "official support" in the form of cheap Central bank loans.

Cash

AIB's use of such funding dropped December 2012 to €19.6bn at the end March 2013.

That has been decreased, thanks both to bond issuance and an increase in the amount of cash on deposit – a far more normal and traditional source of funding for the bank.

Last year AIB successfully issued €500m of covered bond in the first unguaranteed debt raising deal since 2007 and quickly returned to the markets in January with a second deal.

Irish Independent

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