DUBLIN/LONDON (Reuters) - Ireland has sold a larger than expected 1 billion euros of Bank of Ireland BKIR.I debt, cutting its exposure to the bailed-out bank amid growing confidence in the country’s economic recovery.
Private investors bought the 1 billion euros of contingent capital notes, known as CoCo bonds, at a slight premium, beating a target of at least 500 million euros.
IFR, a Thomson Reuters company, reported the outcome of the sale. A market source separately confirmed it to Reuters. Bank of Ireland declined to comment and a spokesman for Ireland’s Department of Finance was not immediately available for comment.
The bond was priced at 100 to 101, IFR reported, suggesting that the Irish state received between 1 billion and 1.01 billion euros for the debt, which was forcibly injected into Bank of Ireland as part of its July 2011 bailout.
The state also holds a 15 percent equity stake in the bank, the only Irish lender to avoid full state control after the country’s property market crash.
The CoCos sale comes a day after Dublin returned to the bond markets for the first time since its 2010 EU/IMF bailout. The 2.5 billion euros raised is a quarter of the 10 billion euros it aims to borrow in 2013 as it prepares to exit its EU/IMF bailout.
“This is optically good for the Irish government,” Danske Bank Ireland bond dealer Owen Callan said. “They can say we made a decent coupon and a small profit - and we have unwound a little bit of the whole sovereign banking coupling.”
Bank of Ireland announced on Wednesday morning that private investors, including some existing stockholders, had agreed to take at least half the 1 billion euros of the CoCos the state has held since a sector-wide recapitalisation in 2011.
In a statement before the sale closed, Finance Minister Michael Noonan said the proposed sale “represents another vote of confidence by international investors in Ireland’s recovery and the government’s banking policies”.
A group five North American investors bought a 35 percent stake in the bank 18 months ago.
The government said on Wednesday that its successful exit from a large portion of the capital notes in Bank of Ireland, which also returned to bond markets last year to raise 1 billion euros, would represent another step in the normalisation of Ireland’s banking sector.
The contingent capital notes, which mature in July 2016 and pay a coupon of 10 percent, convert into equity in the bank if its core tier one capital ratio falls bellow 8.25 percent.
Davy, Deutsche Bank and UBS were mandated to manage the placement and Ireland’s finance department said the deal follows an approach by investment banks late last year, which indicated that there was sizeable investor interest in the notes.
($1 = 0.7654 euros)
Editing by Mark Potter and David Goodman