By Aimee Donnellan
LONDON, Nov 12 (IFR) - Bank of Ireland Mortgage Bank is
hoping to price the first public non government-backed bond
issue from an Irish bank in over three years on Tuesday, marking
a further step on Ireland's road to capital market recovery.
The issuer is seeking to take advantage of a more than 300bp
rally in Irish covered bonds over the past three months to price
a mortgage-backed covered trade. Furthermore, yields on Irish
sovereign debt have retraced by nearly 1000bp in just over a
Citigroup, Morgan Stanley, Nomura, RBS and UBS have been
hired as lead managers to test investor appetite for the euro
denominated trade that is expected to follow an investor call
scheduled to take place on Tuesday at 0830GMT.
"The issuer is looking to take advantage of increasing
demand we have seen for peripheral debt in recent weeks and with
a higher rating than the sovereign it makes sense for a covered
bond to come first," said a banker.
The new deal is expected to be rated Baa3 by Moody's and A
(low) by DBRS while Ireland is rated Ba1/BBB+/BBB+.
Covered bonds are debt instruments issued by banks and
secured by a pool of loans that remain on the issuer's balance
sheet. They offer investors dual recourse, which is a claim
against the issuer and also a preferential claim against the
cover pool in the event of insolvency. For the security they
provide, in core countries they are often rated triple A and in
troubled peripherals they are often rated higher than the
The deal will follow hot on the heels of Irish electricity
provider ESB's sale of EUR500m worth of seven-year debt that
attracted around EUR6bn of demand on Monday.
The Baa3/BBB+/BBB+ rated deal priced at mid-swaps plus
320bp, and while the transaction does not offer much guidance by
way of pricing, bankers said they are taking note of its
"There's clearly demand for bank debt from weaker
jurisdictions and as ESB has clearly shown investors are very
eager to buy Irish debt," said a banker.
Over the course of the past year the cost of Irish
government debt has retraced from the dizzy heights of 14.3% in
July 2011 to recent lows of 4.7% seen in the middle of last
Meanwhile, Bank of Ireland's June 2015 deal has tightened in
from around mid-swaps plus 600bp in June to around 290bp on the
bid, according to the lead managers.
The performance in Irish bank and sovereign debt comes as
investors have taken comfort in the promise of a backstop bid
from the ECB. In late July, ECB president Mario Draghi promised
to hold down the borrowing costs of troubled peripheral
His assurances have already allowed issuers like Portuguese
Banco Espirito Santo (Ba3/BB-) to sell EUR750m worth of
three-year unsecured debt on the back of EUR2.7bn of orders.
Bank of Ireland sold the last Irish covered bond in
September 2009 - a September 2014 bond that is currently bid at
mid-swaps plus 333bp in the secondary market, according to