AIB in two step capital comeback

Allied Irish Banks on 26 November launched the first Additional Tier 1 transaction in euros in two months, a Eu500m perpetual non-call five deal that came just a week after the Irish bank made its return to the subordinated debt market with a Eu750m 10NC5 Tier 2 issue.

The two transactions were launched alongside the implementation of other capital measures and among wider restructuring at the financial institution, and aimed towards the repayment of Eu1.7bn to the Irish state by the end of the year, with a move to privatisation possible in 2016.

“These issuances are key stepping stones in ensuring the completion of the simplification of our capital structure by the end of 2015,” said Bernard Byrne, chief executive officer of AIB.

“This will enable the repayment of capital to the state and positions us well for a return to private ownership.”

Leads Bank of America Merrill Lynch, Davy Stockbrokers, Deutsche Bank, Goodbody Stockbrokers, HSBC and Morgan Stanley skipped initial price thoughts and went out with guidance of the 7.5% area for the PerpNC5 temporary write-down AT1 securities, rated B- by Fitch, before fixing the pricing at 7.375% on the back of some Eu4.75bn of demand.

Philip O’Sullivan, chief economist at Investec Ireland, said that the level was an excellent result for AIB.

“Indeed, the issue was more than nine times oversubscribed at this level, testament to the substantial progress AIB has made in recent years from both a profitability and a capital perspective,” he added.

A week earlier, on 19 November, AIB had attracted Eu5bn of demand for its Eu750m 10NC5 Tier 2 issue. Leads BNP Paribas, Deutsche, Goodbody, Morgan Stanley, Nomura and UBS priced the issue at 395bp over mid-swaps and a yield of 4.153% on the back of some Eu5bn of orders comprising over 300 accounts.

“The outstanding success of our two recent capital raising transactions is very encouraging,” said Byrne at AIB. “The results demonstrate market confidence in AIB as an issuer.

“The significant participation by overseas investors, in both transactions, is an endorsement and acknowledgement of the progress that the bank has made in recent years in restructuring and repositioning itself as a sustainable, profitable and investable business.” l