Bond successes no guarantee for Ireland Inc


One More Thing:Bord Gáis has tapped the bond markets for €500 million, becoming the latest arm of the State to successfully access funds recently.

Remarkably, it was 13 times oversubscribed and the coupon was a competitive 3.625 per cent.

This follows similar successful auctions of late by the National Treasury Management Agency and ESB.

Accounts just released for a subsidiary of the Dublin Airport Authority show that it, too, has had some joy with bonds.

DAA Finance plc repurchased €50.35 million worth of bonds last year from a €600 million loan note due in 2018, netting a €5 million profit.

DAA Finance also drew down a €260 million loan from the European Investment Bank at a knockdown rate of 2.175 per cent to replace a €250 million facility that matured last year and carried a coupon of 6.15 per cent.

Of course, successful corporate bond offerings are no guarantee that Ireland will be able to exit the bailout programme.

For a start, the State needs to raise a multiple of the sums generated by Bord Gáis and ESB – €15 billion-plus a year.

However, they are encouraging.

Both are profitable, solid businesses, with good cash flows and strong track records.

Such fundamentals should always prove attractive to the investment community.

Before the crash, investors took added comfort from the fact that there was an implied guarantee from the State. It was a handy insurance policy.

That all changed when the economy crashed and the Government was forced to pump billions into insolvent banks.

Lending to Ireland Inc became a major risk and the interest rate rising to an unsustainable level, hence the Troika bailout.

The fundraisings by Bord Gáis and ESB indicate a more benign view of Ireland now.

On a brief trip to Ireland at the end of last month, German finance minister Wolfgang Schäuble stated confidently that Ireland was on track to re-enter the markets next year and exit the bailout programme.

Here’s hoping he’s right but there’s still a long journey to travel in that respect.

Our prospects hinge every bit as much on resolving the intractable euro zone financial crisis and on global economic growth being generated to fuel our exports and sustain inward investment and job creation.

Unfortunately, these factors are largely outside our control.

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