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AIB raises €500 million in auction of three-year bond

The almost entirely State-owned bank raises €500 million by selling a bond which is not guaranteed by the government.

Image: Eamonn Farrell/Photocall Ireland

A SUBSIDIARY of Allied Irish Banks has raised €500 million through a bond auction – only its second of the year.

AIB Mortgage Bank auctioned three-year bonds under its Mortgage Covered Securities programme.

The auction of the asset-covered securities – which are secured based on mortgage loans and are not guaranteed by the Irish government – was the first since 2007, and only the second held by AIB this year after issuing a £395 million bond in May.

The bank said the bonds carried an interest rate of 2.7 per cent, and that the bank had received over four times more offers from investors than it had taken up. Over 95 per cent of investor demand came from outside Ireland, it added.

“The final sizing of the transaction, notwithstanding the level of demand, is consistent with AIB’s stated strategy to engage with the market in a balanced and measured manner with a series of well placed, well timed, appropriately structured and priced transactions,” a statement from AIB said.

This would “ensure viable funding levels while building confidence with external investors,” it added.

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The bank is 99.8 per cent owned by the taxpayer, and has been reliant on capitalisation from the State and emergency cash from the European Central Bank in recent years.

Two weeks ago Bank of Ireland became the first Irish bank to borrow without State support, when it raised €1 billion in a similar auction.

Read: AIB says ‘substantial progress’ made on restructuring

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Gavan Reilly

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