Wednesday 25 April 2018

BoI debt teams test appetite for bond sale

Bank of Ireland: sounding out potential global interest for a benchmark bond sale. Photo: Bloomberg News
Bank of Ireland: sounding out potential global interest for a benchmark bond sale. Photo: Bloomberg News

Joe Brennan

BANK of Ireland has dispatched a number of debt teams around the globe to sound out potential interest for a benchmark bond sale, even as the bond markets remain closed for many European banks.

Investment appetite for bank bonds across the eurozone has been dented severely since the sovereign debt crisis crescendoed in late April. It has been eight weeks since an Irish lender has successfully tapped the market, when Irish Life & Permanent raised a €1.25bn, three-year bond.

BoI is using the roadshow -- including at least one to North America -- to keep the market abreast of its recent highly complex recapitalisation, which has brought a net €2.93bn into its coffers.

The cash has boosted the bank's equity tier one ratio -- a key measure of financial strength -- to 8pc from 5.3pc at the end of last year.

It is understood that BoI has highlighted in presentations that its bolstered capital position should leave it well placed to proceed with an unguaranteed bond. But ongoing turbulence in the market has meant the group, led by chief executive Richie Boucher, is most likely to proceed initially with a guaranteed deal.


The second guarantee scheme, or so-called Eligible Liabilities Guarantee (ELG) scheme, which allows banks issue bonds of up to five years in duration, is due to expire at the end of this month.

But the Government is hopeful it will be allowed by the European Commission to extend the scheme until the end of the year, to bring it into line with a deadline for the other domestic institutions to be recapitalised.

As it stands, the main banks have to pay a 1pc fee to the Government under the ELG, but it is expected to rise by a further 0.3 percentage points for higher-rated banks, such as BoI, if an extension is granted. Lower-rated lenders face a 0.4pc fee.

Bond market observers said that any bank brave enough to go to the market will have to pay up for the privilege -- especially in light of the €1.5bn raised in bonds by the Irish State on Tuesday. The National Treasury Management Agency (NTMA) was forced to pay a 4.52pc yield to get a €750m six-year bond over the line, compared to 3.66pc when a bond of the same maturity was sold in March.

For the eight-year €750m bond, the NTMA was forced to stump up a 5.09pc yield, up 0.55 percentage points from what it was paying last August.

But some analysts believe the state-covered banks would find it even harder to tap debt investors if the sovereign had avoided its regular monthly auction this week.

Irish Independent

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