CORPORATE bonds have never really taken off as a source of funding in the Irish market, so it was gratifying to see the enthusiastic response given to the 4 1/2 year issue this week from Irish Permanent.
Priced to yield 40 basis points over corresponding gilts, the initial £50 million being placed by NCB was increased to £60 million, with about one third of the funds coming from overseas investors. Certainly Irish Permanent treasurer Michael Torpey was enthusiastic about the bond, stating that the terms are as good as anything Irish Permanent could have got out of London.
Stockbroker NCB, which handled the bond, was justifiably jubilant about the response it got in the market, and it shows that the gilt arm of the broker has coped well with the departure last year of Nigel McDermott to Dermot Desmond's IIU company in the IFSC. NCB has suffered a number of high profile departures in recent years, but has always managed to bounce back and retain its number two position in the broking hierarchy.
It was also a rather good week for the market kingpins, Davy, which placed Tiger Management's 24 million shares in Waterford Wedgwood at almost the market price. This was an exceptionally good deal for Tiger as usually a chunk of shares of this size would be placed at a discount to the market price. Irish and British institutions were happy to take up the shares, indicating a belief on this side of the Atlantic that Waterford Wedgwood is a growth stock.
Tiger is something of a maverick among American investors in European stocks and does not adopt the long term approach that other American institutions such as Putnam, Fidelity and Franklin have adopted. In the past years, Tiger has built up substantial positions in both Smurfit and Waterford Wedgwood and then sold off the lot.
Tiger's timing in its sale of Smurfit shares was pretty astute, given the subsequent slump in the share price. It remains to be seen who has called Waterford Wedgwood's prospects correctly - Tiger or the institutions which took up its shares.
Otherwise, it was a case of the Dublin and London markets moving steadily backwards while Wall Street went from new high to new high, with no sign that the Dow's bull run is coming to an end. The graphs accompanying this column show these trends clearly.
Financial shares felt the brunt of the weakness in Dublin and London, with weaker bond prices having a negative effect on financials which are usually assessed on the basis of their dividend yield.
Of the industrials, CRH and Greencore continued to be the best performers, with both trading at or around their all time highs and enjoying good bid interest at those levels. Investors in CRH will undoubtedly be happy that the Irish group has not become involved in a bid for the bricks division of Redland. This would involve a bid of upwards of £200 million.
As one institution put it, "CRH could spend £200 million a lot more fruitfully than on Redland", and it seems that CRH is looking more to expanding its merchanting arm in Britain than getting involved in capital intensive manufacturing businesses.
