NTMA will tap existing bond in bid to raise €2bn

The NTMA will look to raise about €2bn this week through a syndicated tap of an existing bond.

The NTMA has set a target of raising €10bn in new capital this year as it attempts to have €19bn in cash reserves when the country exits the bailout programme in November.

The agency issued a statement yesterday saying that it would seek to raise new money through a syndicated tap of the 2017 treasury bond in the near future, subject to market conditions.

A source with knowledge of the situation said the transaction could occur as early as today and the agency would aim to raise between €1.5bn and €2.5bn.

A syndicated tap works by offering further tranches of an existing bond at a pre-determined price. The offer will be made available to the institutional investor base of a group of banks mandated by the NTMA. These include the British-based Barclays Bank; Danske Bank; Royal Bank of Scotland, which owns Ulster Bank; the French bank Société Générale; and the Irish stockbroking firm Davy.

The 2017 Treasury bond was issued last July at an interest rate of 5.9%. The NTMA declined to say at what price the syndicated tap would be completed, but Irish bond yields have narrowed since last summer.

Senior fixed income strategist at Danske Bank, Owen Callan, said: “[This] marks a massive step in Ireland’s long process of fully regaining long-term bond market access, and fully normalising its primary market issuance in 2013.

“We expect another one or two syndicated bond issuances during the course of the year.

“Ireland’s ability to return to the markets unaided will be the key test as to whether it can successfully exit the troika support programme at the end of 2013 on schedule, and it will also be a key determinant in the willingness of the major ratings agencies to upgrade Ireland back into a more favourable territory over the course of 2013, itself a major obstacle to fully regaining its sovereign creditworthiness,” Mr Callan said.

Ireland was forced into an EU/IMF bailout programme in Nov 2010 as the cost of Irish debt surged to unsustainable levels.

The Government made a successful return to the markets last year.

Finance Minister Michael Noonan is in negotiations with the ECB about using the outright monetary transactions programme as a support mechanism when the country looks to make a full return to the markets.

Under the outright monetary transactions, the ECB will buy unlimited amounts of short-term debt in return for meeting certain conditions.

But securing market access over the medium term hinges on the Government restructuring the €64bn used to backstop the banking system.