State-owned AIB set to go to market with senior unsecured bond issue

AIB is likely to go to the market today with its first senior unsecured bond issue since 2008.

State-owned AIB set to go to market with senior unsecured bond issue

Sources say the 99.8% state-owned bank is likely to raise €500m. Moreover, the paper will have a yield of 3% and a maturity of three years.

The Ba3/BB/BBB-rated issuer has mandated Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and Nomura to arrange an investor update yesterday ahead of the potential deal.

While AIB has sold public bond market transactions, this is the first time that investors will be able to buy the credit on an unsecured basis.

AIB sold a €500m three-year covered bond in Nov 2012 at 270bp over mid-swaps. Funding levels have been improving steadily throughout 2013 and a €500m five-year covered deal sold in September by the issuer priced at 180bp over mid-swaps despite being at a longer maturity.

That deal has since tightened to 141bp over mid-swaps, according to Tradeweb.

Bank of Ireland is the only other Irish bank to have raised senior debt in the public market. It sold a €500m three-year at 220bp over mid-swaps at the end of May 2013.

It is believed that AIB will look to issue a number of senior bonds of longer maturity over the next year.

The State-owned bank is rebuilding its balance sheet in the wake of the financial market crash. It aims to return to outright profitability in 2014, although it is still working its way through sizeable mortgage and SME loan losses.

- Additional reporting Reuters

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