AIB sees ‘vote of confidence’ in strong response to 7s
Ireland’s AIB priced a well-received Eu500m seven year covered bond yesterday (Wednesday) after what an official at the issuer said was a “timely” upgrade of Irish mortgage covered bonds by Moody’s and an encouraging bond auction by the sovereign, with demand for AIB’s deal a “vote of confidence” in the bank.
Leads Barclays, Commerzbank, Danske, HSBC and Société Généralé collected more than Eu2.4bn of orders across 140 accounts for AIB Mortgage Bank’s first euro covered bond since it issued a Eu500m five year in September. That was priced at 180bp over on the back of Eu650m of orders.
Investor appetite for yesterday’s deal allowed the leads to skip initial price thoughts and go straight to guidance of 96bp-98bp over before fixing the spread at 95bp over. This represents pricing inside fair value of 96bp over, according to syndicate officials at the leads.
Chris Curley, co-head of term funding at Allied Irish Banks, said that the deal was “a vote of confidence in AIB”.
“We were pleased with the deal and the reception it received,” he told The Covered Bond Report.
He noted that Irish bank funding costs have reduced, and are likely to continue to fall, adding that the cost reduction is the result of international investor recognition of the progress Irish banks and the sovereign have made since the country’s bailout in 2010.
“As a result of this progress, we now have the ability to access markets at competitive pricing on an ongoing basis,” said Curley.
The decision to come to market yesterday (Wednesday) followed an upgrade of Irish mortgage covered bonds by Moody’s and the Irish government’s first bond auction since 2010 last Thursday (13 March).
“The upgrade by Moody’s was timely, and recognised the fact that covered bonds will be exempt from bail-in the BRRD,” said Curley. “It was certainly timely and last week’s government bond funding exercise confirmed our thought process for funding ourselves.”
Curley said that AIB has modest funding requirements but, recognising the markets were in good shape, decided to issue a longer dated deal to extend its maturity profile.
Germany and Austria were allocated 45%, the UK 22%, southern Europe 8%, the Nordics 8%, Ireland 7%, Switzerland 3%, the Benelux 2%, France 2%, Switzerland 2%, and others 3%.
Asset managers took 64% of the bonds, banks 17%, insurance companies and pension funds 14%, private banks 2%, central banks and official institutions 2%, and others 1%.