Bank of Ireland raises €343m in bond sale

BANK OF IRELAND raised £300 million (€343 million) in new investment on the bond markets yesterday, although it paid a high price on the Government-guaranteed debt.

The bank issued the three-year State-backed bonds at a price that would yield 440 basis points (4.4 percentage points) more than the benchmark mid-swap rate and 500 basis points above the gilt rate.

Despite the premium paid on the debt, Dublin-based stock market dealers viewed the fund-raising as positive for Bank of Ireland, indicating that it still has the capacity to secure the interest of private investors.

The price paid was more than double that of securities with the same rating as the Irish Government guarantee, which carries an “AA” rating from Standard Poor’s.

The private placement, which was managed by Nomura International, reflects how investors are demanding higher rewards to hold Irish debt following Minister for Finance Brian Lenihan’s most recent estimate that the bailout of Ireland’s banks might cost as much as €50 billion.

Dealers noted that the temporary withdrawal of the National Treasury Management Agency from the bond markets was giving Bank of Ireland a “window” in which to raise funding.

The successful, if expensive, foray into the bond markets may have the effect of making future transactions easier and cheaper for the bank.

Bank of Ireland’s share price fell 3.4 per cent, or two cent, to 59 cent yesterday.

However, this was in line with a generally poor day for banking stocks across Europe. Some 14 million shares in Bank of Ireland were traded on the Dublin market yesterday.

“The demand was there and we priced the deal to that demand,” said Darach O’Leary, head of term funding at the Bank of Ireland. “It was competitively priced relative to the secondary curves of euro government-guaranteed paper issued earlier in the year,” he said.

– (Additional reporting: Bloomberg)