| 10.4°C Dublin

Bank of Ireland hires advisers for launch of its first high risk Tier 1 bond


Bank of Ireland’s Dublin HQ

Bank of Ireland’s Dublin HQ

Bank of Ireland’s Dublin HQ

Bank of Ireland has hired advisors to arrange its first high risk “additional Tier 1” bond.

It will be the first “benchmark” or large scale deal of its kind from an Irish bank.

Permanent TSB opened a new financing market for Irish lenders when it raised €125m in additional Tier 1 bonds earlier this year, paying interest of 8.625pc.

Unlike traditional bonds issued by banks, the holders of so-called Tier 1 bonds go into the deal knowing they are near the top of the queue for losses if the bank struggles.

The bondholders don't have an automatic right to dividends or interest payment, which can be switched off if the performance of the borrower struggles.

Their investment is also easier to convert into ordinary shares, even if a lender is solvent.

Unsurprisingly investors tend to seek higher returns, but regulators regard additional Tier 1 bond as a solid way of financing banks.

Bank of Ireland is preparing to hit the road to drum up support for its new bond, meeting investors in the UK and Europe on today and tomorrow.

"I think a lot of people have been waiting to see this come so we've already been inundated with calls to meet them," a banker involved in the deal told Reuters.

"It definitely feels like there is good momentum behind the name, and the rarity value in terms of the region and that asset class should help."

Bank of Ireland has mandated Deutsche Bank and UBS as joint structuring advisers and joint bookrunners, with Bank of America Merrill Lynch, Credit Suisse, Davy and Morgan Stanley acting as joint bookrunners for the deal. (Additional reporting Reuters)

Online Editors