Investors shunned Irish private placements in the financial crisis

Irish private placement issuance peaked at €121 billion in 2007 but had slumped to €29 billion by 2014, according to new research published by the Central Bank.

A private placement allows debt to be placed directly with investors without recourse to the public markets, and are a sub-set of total bond issuance.

In 2007, on the cusp of the financial crisis, some €121 billion of these bonds by both Irish and IFSC banks were outstanding and were an important source of wholesale funding.

German and French

However, by the end of 2014, the private placement market had diminished to €29 billion, with a noted decline in holdings by Irish domestic banks by the end of the period surveyed. By 2014, IFSC banks had more private placement activity on balance sheets than domestic banks, the Central Bank found.

“With the onset of the financial crisis, the downgrading of banks’ credit ratings, and associated fall in investor confidence, made it more difficult to roll-over extant funding and dissipated any appetite for new issuance,” the Central Bank said.

Up to 62 per cent of instruments placed privately were held by other financial sector entities at end-2014, with investment funds and money market funds the prevalent holders.

German and French residents are estimated to be the largest euro area holders, but non-euro area holders held more than a quarter of the total, the research found.