Tuesday 12 December 2017

Ulster Bank aims to cut debts with buy-back offer for its bondholders

Donal O'Donovan

Donal O'Donovan

ULSTER Bank has launched an offer to "buy back" bonds secured on pools of its First Active home loans at prices ranging to as little as 45 cent in the euro.

UK taxpayer-owned Ulster Bank said the proposal to buy back the debt is aimed at optimising the bank's financial structure, by cutting its borrowings.

The plan to "strengthen its balance sheet by purchasing the notes at below their par value" carries echoes of deals at the likes of Anglo Irish Bank and AIB.

Unlike those punishing deals for lenders, the Ulster Bank offer is not coercive – bondholders are free to decline the offer with no fear of losses being imposed if they opt to hold their investment.

Ulster Bank said it aims to buy back €1.25bn of the more than €5bn of bonds outstanding under its Celtic residential mortgage backed securities (RMBS) bond issues.

It is offering prices ranging from a 99 cent in the euro to 45 cent in the euro for the bonds, which were issued in nine separate tranches of different seniority that are secured on four pools of mortgages known as Celtic 9, 10, 10 and 12.

The final pricing will be determined through a Dutch auction as bondholders respond to the tender offer.

The bank already holds a significant share of the total issuance outstanding.

Last year, Ulster Bank opted not to exercise an early redemption option that would have allowed the lender to redeem all of the debt that was backed by the mortgages, but only by paying off investors in full.

The latest voluntary offer is a much cheaper option from the bank.

If the bonds are not redeemed or sold back, Ulster has until 2047 to repay the debt. The buy-back offer was launched last night and is set to close at 4pm on June 24.

Irish Independent

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