AIB raises €500m through five-year bond in third move since November

AIB raised €500m through a five-year covered bond at roughly an interest rate of 3.2% — the third time it has tapped the markets since last November.

The deal was placed across roughly 90 international investors, said the 99.8% State-owned bank. AIB was forced into the Government fold after shipping billions of property-related losses since the market collapsed in 2008.

Last November’s €500m covered bond issue was the first time the bank accessed private funding in three years.

A covered bond is backed by AIB’s mortgage book. Investec analyst, Emmet Gaffney, says AIB’s latest bond issue was motivated by a desire to “keep its hand in the markets”.

As it stands, AIB’s loan redemptions are running ahead of new lending. Moreover, it is unlikely that AIB will look to issue unsecured debt until it can secure a more favourable price, said Mr Gaffney.

In a research note issued yesterday, stockbroking firm Cantor Fitzgerald said it did not expect the Government to recoup any of the €30bn it has pumped into the legacy banks through the ESM.

“However it is hopeful that Irish banks may avail of a guarantee for the ESM to securitise their tracker-mortgage books. This would significantly improve the viability of the Irish banks and remove a substantial overhang for the Irish Exchequer,” said Cantor Fitzgerald.

It expects the country to exit the EU/IMF bailout programme in November. Moreover, it expects the Government to avail of a precautionary credit line either through the European Financial Stability Fund or the ECB’s Outright Monetary Transactions (OMT) programme.

Cantor Fitzgerald is forecasting GDP growth of 1.8% for next year, which is below the Government’s forecast of 2.4%.