BoI raises €350m from buy-back

Bank of Ireland has raised about €350 million from a tender offer to buy back residential mortgage backed securities.

In a statement to the stock exchange this morning, the lender said it would accept for purchase approximately €1.1 billion of notes issued by Kildare Securities Limited and Brunel Residential Mortgage Securitisation No 1.

The bank paid between 33 per cent and 92 per cent of the notes' face value.

This means the bank has met its €4.2 billion capital target set by the Central Bank, and Minister for Finance Michael Noonan this morning said he would not be imposing losses on subordinated debt in Bank of Ireland as a result.

Mr Noonan said last month he was considering the move to help the lender generate the €350 million in capital it needed by the end of December, which included the possibility of applying to the courts for a subordinated liabilities order that would write down the value of the debt by up to 100 per cent.

"As a result of the Bank’s announcement this morning that it has now raised approximately €350mn of core tier 1 capital, through its tender offer and purchase of capital securities, the Minister is no longer considering the use of the powers available under CISA for these purposes at this time," a statement from the Department of Finance said.

Goodbody analyst Eamonn Hughes said any move on the junior bondholders would now be likely to encounter legal challenges.

Analysts are now viewing any further capital generation from liability management as a bonus. "We never expected equity to be a potential source of additional capital ahead of the December 31st deadline but the fact that the issue is completed should now provide clarity," NCB Stockbrokers said.

"Bank of Ireland have been proactive in attempting to retain advantageous funding lines while cognisant of the need to minimise reputational damage to smooth future access to these markets. The fact that they have been able to manufacture a solution that has also allowed them to address the potential capital shortfall is a delicate solution to a complex situation."