Saturday 24 March 2018

Bank of Ireland offers premium on €750m bonds

Bond sale: Bank of Ireland. Photo: Bloomberg News
Bond sale: Bank of Ireland. Photo: Bloomberg News

Bank of Ireland paid a premium to sell the first public benchmark bond by a Government-guaranteed lender in six months.

The bank offered €750m of 2 1/2-year notes priced to yield 420 basis points more than the benchmark mid-swap rate, equivalent to 482 basis points over German government debt, according to data compiled by Bloomberg.

Euro-denominated financial bonds due in one to three years and bearing a rating equivalent to the Government’s AA- at Standard & Poor’s pay an average spread of 130 basis points over government notes, according to Bank of America Merrill Lynch index data.

“It is undoubtedly expensive and pricing like this wouldn’t be sustainable in the long-run,” said Sebastian Orsi, an analyst with Merrion Capital in Dublin.

“But it will show if an Irish bank can get access to the market and hopefully that, in turn, will lead to more favourable pricing in future. The level of demand will be interesting to see.”

Investors are demanding higher rewards to hold Irish debt after Finance Minister Brian Lenihan said on September 30 a bailout of the nation’s financial firms may cost €50bn.

Borrowings by the country’s lenders from the European Central Bank rose 25pc last month to €119.1bn, the Central Bank in Dublin said on October 8. The figure includes international and domestic institutions.

While some Irish lenders, including Bank of Ireland, have sold debt securities in private sales in recent months, no Government-guaranteed lender had issued a benchmark bond since April, when Irish Life & Permanent found buyers for €1.25bn of bonds.

“It could also be viewed as positive for the sovereign if the banking sector can be demonstrated to be normalising,” said Orsi.

BNP Paribas, Deutsche Bank and Nomura managed the sale with Bank of Ireland.


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