BoI raises €250m through bond issue

Bank of Ireland raised €250m through a 10-year subordinated bond with a coupon of 10%. The issue was up to four times oversubscribed.

“This follows on from the bank’s highly successful €1bn of 3-year un-guaranteed euro fixed rate Irish covered bond transaction in mid-November. The trade is a significant vote of confidence by international bond investors in Bank of Ireland and Ireland. This further reflects the material progress made by the Group and the economy.

The issue further supplements the bank’s capital position,” the bank said.

The last time Bank of Ireland undertook a similar trade was July 2008.

Owen Callan of Danske Bank said: “Given that this class of bond suffered significant losses during the crisis and was not protected by the Irish government, it’s encouraging that investors are willing to get involved in this market once again.”

“It’s another positive sign of how the banking system is inching out of the crisis and regaining market access.”

It was also revealed yesterday that the European Commission has extended the Government’s bank guarantee scheme until the end of June next year.

Last month the secretary-general of the Department of Finance, John Moran, said that the Government would apply to have the bank guarantee rolled over for another six months with the aim of weaning the pillar banks off the scheme during the first quarter of next year.

The Eligible Liabilities Guarantee (ELG) scheme has been in operation since 2009 and has to be renewed every six months. All deposits over €100k with the covered banks are included in the ELG.

However, the scheme costs the banks €1bn in fees every year, which is hampering the sector’s return to profitability.

The ELG is a continuation, although smaller in scope, of the State guarantee of the banking system in Sep 2008, which covered €440bn in liabilities. When the ELG is removed the State deposit guarantee scheme, which covers the first €100k in deposits will still be in operation.

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