The Irish banking sector took another step towards normalisation yesterday with State- owned AIB and Permanent TSB raising €1bn between them.
AIB raised €500m through a three-year senior unsecured bond. The transaction was arranged by Deutsche Bank, Goldman Sachs, Nomura, JP Morgan and Morgan Stanley and attracted €3.6bn of total demand from a diverse range of international investors.
Final pricing was at +235bps over mid swaps with a final order book at these pricing levels of €3.19bn, in excess of six times over-subscribed, said AIB in a statement.
Permanent TSB raised €500m through a residential mortgage-backed securities . “There was strong investor interest in the transaction, known as Fastnet 9, which was significantly over-subscribed with demand of more than three times the deal size.
“The transaction was priced at 3-month Euribor plus 1.65%, which was lower than the initial guidance,” said PTSB in a statement.
The Minister for Finance, Michael Noonan, welcomed the move by both banks.
“Last week the Government agreed to exit the EU/IMF programme without further supports.
“The initial market reaction has been positive and these transactions, the first of their kind for both banks for a number of years, are further evidence of improved international investor sentiment towards both institutions and towards Ireland.”
AIB’s senior unsecured bond was the first of this type of issue since 2009 — before the country entered an EU/IMF bailout programme.
Senior unsecured bonds are not backed by any type of collateral. During the height of the eurozone debt crisis in 2011, the yields on these type of AIB bonds were trading at just under 20% as investors dumped the paper on fears that the bank was facing imminent collapse.
According to AIB the deal attracted “a very high quality mix” of over 260 investors from 25 countries, including the UK, Germany, the Nordics, France & Italy.
A total of 99% of the final allocations were made to international investors. “[This] transaction marks another important milestone in our efforts to re-engage with the funding markets in a balanced and measured way.
“Our full re-entry into the senior unsecured market on an unguaranteed basis after a number of year’s absence is a further indicator of AIB’s progress.”
Over the past 12 months, both AIB and Bank of Ireland have issued a series of covered bonds. However, PTSB’s residential mortgage-backed securities was the first issue of this type of bond since before the crisis in 2007.
A residential mortgage-backed security is the sale of a tranche of mortgages, which will be taken off PTSB’s balance sheet and into a special-purpose vehicle.
“This was a very successful transaction for Permanent TSB,” said group treasurer Kieran Bristow.
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