Ireland is poised to sell on its AIB Contingent Convertible (CoCo) as it seeks to capitalise on positive sentiment in the aftermath of the blow-out sovereign €5bn bond this week, according to sources.
The rumours came hours after Bank of Ireland launched a €500m five-year bond in a bid to capitalise on the positive sentiment towards Ireland evident following a landmark €5bn sovereign issue earlier this week.
The AIB sale would replicate its exit from a €1bn three-year Bank of Ireland CoCo in January when it made a €10m profit on the position it had owned since the bank’s bailout in 2011.
The dealers, Davy, Deutsche Bank, and UBS found €5bn of demand, and the bond has enjoyed a four-point rise in secondary markets to 105.
“Ireland’s success reaffirms that the country is on the road to recovery, and has opened the door for other Irish issuers to access the market,” said a syndicate banker.
“There is certainly demand for CoCos from investors, and from the State’s point of view, it makes sense to be deleveraging itself from the banking sector,” said another syndicate official.
Provided AIB’s full-year results on Mar 27 don’t reveal any major horrors, the path should be clear to give investors the chance to buy the €1.6bn CoCo, which pays a coupon of 10% until it matures in 2016. The CoCo is a subordinated Tier 2 instrument that converts into ordinary shares if AIB’s capital ratio falls below 8.25%.
“The results will show the quality of the assets AIB is holding which is vital to investors that will be looking at buying their hybrid instruments,” said another banker.
Bank of Ireland has been storming ahead as it seeks to regain full access to the markets. In November it returned to the covered bond market and issued a €1bn deal and followed that up with a Tier 2 €250m capital deal.
AIB has had to tread more carefully, but has proven market access with two short-dated covered bond deals.