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Bank of Ireland raises €750m from junior bond sale

Bank of Ireland raises €750m from junior bond sale

DUBLIN: Bank of Ireland raised about €750 million through the sale of the first batch of junior debt from its new holding company, which was set up under new European rules designed to minimise taxpayer bailouts in the event of a future crisis. The bank sold £300 million (€333 million) of so-called Tier 2 notes, which were priced to carry an interest rate of about 3.3 per cent and are due to mature in 10 years’ time. It also sold $500 million (€418 million) of similar bonds, which were priced to yield about 4.2 per cent.

Bank of Ireland set up the holding company in July following consultation with the euro zone’s Single Resolution Board, which is responsible for overhauling or even winding down ailing banks in the event of a future crisis. AIB is planning a similar structure. Debt – both junior and senior – issued in future by the holding companies could be “bailed in” if needed, before state support would be drawn upon. Deposits, however, will remain in the existing operating banks, where they would enjoy greater protection. Investec analyst Owen Callan estimates that Bank of Ireland will need to issue between €4 billion and €5 billion of “bail-inable” debt, or what are known as minimum requirement for own funds and eligible liabilities (MREL), in the next few years.