Business Irish

Monday 14 October 2019

Bank of Ireland raises €300m in bond auction it postponed last month

Bank of Ireland. Stock photo: Getty Images
Bank of Ireland. Stock photo: Getty Images

Shawn Pogatchnik

Bank of Ireland says it has raised €300m in a bond auction that it had postponed last month amid weak demand.

Today’s auction of 10-year junior bonds - so called because such debt securities are lower in line to be redeemed if the issuer gets into financial trouble - attracted more than €900m in bids, reflecting strong interest. Successful bidders received bonds that pay an annual interest rate of 2.375pc. 

On September 3, Bank of Ireland cancelled its auction seeking to raise €300m after receiving only €340m in bids. The low demand on that occasion increased the risk that the bonds could dip in later trading, leaving bondholders to nurse paper losses.

“We are pleased with the bond transaction carried out earlier today which was more than three times oversubscribed and further enhances the group’s total capital position,” said Sean Crowe, chief executive of Bank of Ireland Markets & Treasury. “We were particularly encouraged by the strong demand from international investors with interest from across the UK, continental Europe and North America.’’

Last week, AIB raised €500m in its own auction of junior bonds that attracted €3.6bn worth of bids. They paid a 5.25pc rate of interest.

While Bank of Ireland’s issue today was of Tier 2 bonds, AIB last week sold Additional Tier 1 (AT1) bonds. The respective interest rates that the two banks offered reflect the level of risk involved.

In event a bank faces insolvency, Tier 1 bondholders would be repaid first, Tier 2 holders next, with AT1 holders last in line and most at risk of losses.

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