BOI capitalises on market sentiment with €750m deal

Bank of Ireland brings five-year benchmark bond to market

Bank of Ireland is set to take advantage of the positive mood towards Ireland as evidenced by yesterday’s over-subscribed issuance of government debt. Photograph: Bryan O’Brien/The Irish Times

Bank of Ireland is set to take advantage of the positive mood towards Ireland as evidenced by yesterday’s over-subscribed issuance of government debt. Photograph: Bryan O’Brien/The Irish Times

 

Bank of Ireland has followed Ireland’s successful €3.75 billion sovereign debt issue yesterday with a bond issue of its own, taking advantage of the positive sentiment to borrow €750 million from the bond markets.

The bank has completed a benchmark five year bond which has a maturity of January 15th 2019.

Ciaran Callaghan, banking analyst with Merrion Capital, says that the deal will help the bank to pre-fund future scheduled term redemptions of about € 1.6 billion and € 5.7 billion over the course of 2014 and 2015 respectively.

“ The bank is likely use the majority of the new issuance proceeds to reduce residual ECB borrowings (€ 9bn at June 2013) or to fund new lending,” he said, adding that BOI may be “particularly involved” in the IBRC liquidation over the coming months.

BOI yesterday mandated lead arrangers on the deal: Citi, Deutsche Bank, Morgan Stanley, Nomura and Royal Bank of Scotland, and the deal is expected to be rated Ba3/BB+ by Moody’s and S&P.

Yesterday the National Pension Reserve Fund (NPRF) disclosed that it had sold 44 million shares in the bank from its discretionary fund, which is unrelated to its recapitalisation of the bank, raising €12 million for the state and reducing its shareholding in Bank of Ireland from 14.05 per cent to 13.95 per cent.

Bank of Ireland has tapped the bond markets for funding several times over the last year, most recently in November when it raised €1 billion in a deal which was secured on a pool of Irish residential mortgages. The deal was oversubscribed at more than € 3.6 billion.

Some other recent deals from BOI are as follows:

€1bn 3yr Irish Mortgage ACS transaction in November 2012

€500m 5yr Irish Mortgage ACS transaction in March 2013

€500m 3yr unguaranteed senior unsecured funding transaction in May 2013

€500m 7yr Irish Mortgage ACS transaction in September 2013