Permanent TSB to complete first state of capital raise

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By Helene Durand

LONDON, April 27 (IFR) - Permanent TSB (Berlin: IL0A.BE - news) will complete the first stages of a broader capital raise later on Monday when it prices Ireland (Other OTC: IRLD - news) 's first ever Additional Tier 1 bond issue.

Lead manager Deutsche Bank (Xetra: 514000 - news) started marketing the 125m perpetual non-call six-year bond at initial price thoughts of 9% area, according to a source, in line with the level mooted last week.

Investor (Stockholm: INVE-A.ST - news) interest at the time was in excess of 800m, the source said.

"Any investor buying this will be taking a big risk; this is not a straightforward story," said a banker away from the sale.

"I suspect there will be quite a bit of overlap between who buys the Additional Tier 1 and the equity. A lot of investors will have seen what happened with Bank of Ireland and will be hoping the same will happen to Permanent. They see value in the end-game."

Ireland's third largest domestically owned lender is also planning to raise 400m in the first public share sale by an Irish bank since the financial crisis. [ID: nL5N0XK165]

The shares, to be listed on May 5, are being marketed at a price range of 3.90 to 4.50, implying a market capitalisation of approximately 1.9bn, the loss-making lender said.

As well as the capital raise, PTSB is hoping to generate at least 330m of capital from what it calls "management actions" such as asset sales.

"If you believe in the plan, the equity raise, and that their legacy book will become insignificant, then it makes sense," another banker said. "I am guessing hedge funds will be the main buyers."

The bond will convert into equity if PTSB's Common Equity Tier 1 ratio falls below 7%. The lender's CET1 ratio was 14.2% on a transitional basis at the end of 2014.

The transaction is expected to be priced later today. (Reporting by Helene Durand, editing by Julian Baker)