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PROPERTY:

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Ever thought about what a multimillion pound budget would buy you?

Bank of Ireland starts marketing inaugural CoCo

Reuters - UK Focus

(Adds background, quotes)

By Alice Gledhill

LONDON, June 11 (IFR) - Bank of Ireland (Other OTC: IRLD - news) is set to become the first Irish bank to issue a benchmark Additional Tier 1 bond, providing an acid test of whether the Irish banking turnaround story will support appetite for its riskiest debt.

Bank of Ireland has set initial price thoughts on the perpetual CoCo deal at 7.625% area, according to a lead banker. It is aiming to raise EUR750m after meeting with investors on Tuesday and Wednesday this week.

The Irish banking sector suffered badly during the financial crisis but the recovery story is now well entrenched.

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"There is quite a lot of good will towards Irish names - they are no longer viewed in the same peripheral bucket as Spain or Italy," an investor said. "Their ratings have caught up with their spreads."

Moody's upgraded Bank of Ireland's senior debt rating to Baa2 from Ba1 in May. Its outstanding paper has performed strongly in recent years. Its 2% May 2017s, for example, have tightened from 185bp over mid-swaps to around 100bp over since July 2014.

Permanent TSB (Berlin: IL0A.BE - news) is the only other Irish bank to have issued Additional Tier 1 capital. It placed EUR125m with a small group of investors in April, offering a coupon of 8.625%. That transaction was yielding 8.476% on Thursday, according to Eikon prices.

Deutsche Bank (Xetra: 514000 - news) and UBS (NYSEArca: FBGX - news) are joint structuring advisers and joint bookrunners, while Bank of America Merrill Lynch, Credit Suisse, Davy and Morgan Stanley (Xetra: 885836 - news) are joint bookrunners for the new issue.

The deal is expected to be rated B2/B- and is callable after five years. Bonds will be temporarily written down if the bank's Common Equity Tier 1 ratio falls below 5.125%. Bank of Ireland's fully-loaded CET1 ratio was 9.3% at the end of 2014 while its transitional CET1 was 14.8%. (Reporting by Alice Gledhill, Editing by Helene Durand, Julian Baker)