Major investment banks to market $1bn-plus BoI bond
Bank of Ireland has lined up four major investment banks to market a $1bn-plus (€737m) bond, its first public offering aimed at US investors since the Government brought in the original banking guarantee.
Market sources said that the two-year bond was expected to price at 1.75 percentage points over the benchmark mid-swaps rate, which stands at 1.14pc. The bond is covered by the extended guarantee scheme, which covers Irish lenders as they issue bonds of up to five years in duration.
Bank of America Merrill Lynch, JP Morgan, Morgan Stanley and Nomura opened an order book yesterday afternoon and it is expected to price later today.
BoI last took the market with a US dollar-denominated bond issue at the end of August, when it raised $1bn. However, this deal was targeted at Asian institutional investors.
This is BoI's first benchmark public dollar transaction aimed at the North American market since December 2006 -- two months before Irish banking stocks hit an all-time high. It is understood, however, that the bank has carried out a number of private deals in America over the past two years.
Meanwhile, shares in BoI dropped a further 5.7pc yesterday to €1.11 as investors continued to react to the Government taking a 15.7pc stake in the bank on Monday, as a EU ban on the bank making certain cash dividends forced it to hand over stock to the State instead to meet a payment due over the weekend.
Merrion Capital analyst Sebastian Orsi said the dilution of existing shareholders and increased government ownership -- effectively to 34pc, when the State's right to take a 25pc stake in four years is included -- "are being perceived as negative".
But, on the positive front, he said that the €250m coupon payment in shares reduced the amount BoI needed to raise to recapitalise itself and increases its market capitalisation.
"The creation of a major common shareholder increases the alignment of the Government's interest with private shareholders," he said. "We believe the (State) will support a potential rights issue, if only to ensure a successful outcome."
However, the analyst noted that there were considerable risks attached to National Asset Management Agency discounts and Brussels' verdict on BoI's restructuring plan.