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Bank of Ireland set for return to bonds market

Bank of Ireland is set to become the first bailed-out bank to return to the bond markets, after saying it plans to raise funds secured on some of its pool of Irish mortgages.

Bank of Ireland is set to become the first bailed-out bank to return to the bond markets, after saying it plans to raise funds secured on some of its pool of Irish mortgages. The Irish Independent says that speculation in the markets suggested the bank could raise as much as €1 billion through the deal, and that it is likely to pay around 3.5% to borrow on the markets for an anticipated three years.

Bank of Ireland would not comment on the details of the planned bond before a call with investors today. The “covered bond” deal will be the first bond issued by an Irish bank without a state guarantee for three years.

It will be Bank of Ireland’s first public bond of any kind since 2010. A “covered bond” is a type of IOU that is secured not on the borrower itself but on a pool of assets. The planned bond deal marks a cautious return to independent borrowing for Bank of Ireland, and a low-risk investment for investors.

The Bank of Ireland bond is expected to be rated Baa3 by Moody’s and A (low) by Canadian rating agency DBRS – better than their ratings for the Irish Government. The bank has hired five banks to manage the deal: Citi, Morgan Stanley, Nomura, Ulster Bank parent RBS and UBS. Bank of Ireland is looking to take advantage of the increasingly positive sentiment about Ireland in the markets.

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