Financial Services

AIB trims €625m bond yield amid strong investor demand

Bank opens ‘and and all’ tender for €500m in older additional tier 1 debt as it pays 7.125% on new AT1 perpetual issue

Strong demand from investors allowed AIB to cut the interest rate it was offering as it raised €625 million in new capital. Photograph: Conor Ó Mearáin / Collins

Ciara O'Brien
Wed Apr 24 2024 - 07:59

Strong demand from investors allowed AIB to cut the interest rate it was offering as it raised €625 million in new capital, the bank said on Wednesday.

AIB said demand for the Additional Tier 1 (AT1) perpetual bond was strong, peaking at €3.2 billion. That allowed the bank to cut the interest rate it was offering to investors from the original 7.625 per cent to 7.125 per cent.

AT1 bonds can be converted to equity or written down entirely if the bank’s capital strength – its Common Equity Tier 1 CET1 ratio – were to fall below 7 per cent, and, as perpetual bonds, do not have a maturity date.

Given the additional risk being taken by investors over other types of debt, AT1 bonds are typically the highest-yielding bank bonds investors can buy.

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The bank said the backers of the new funding were primarily high-quality asset managers, with UK investors accounting for 40 per cent, French investors at 20 per cent and 15 per cent coming from US offshore funds.

It said the money raised will help support the banking group in meeting its regulatory capital requirements.

“Strong funding and capital ensure AIB is well positioned for sustainable growth, so we are very pleased to see the continuing demand from investors for our bond issuances,” said AIB chief executive Colin Hunt. “The investor appetite for the perpetual bond we issued yesterday represents another strong vote of confidence in the bank as we embark on our new three-year strategy with a transformed, reshaped, and revitalised group.”

The latest capital raise follows the $1 billion 10-year senior bond the bank issued in March at an interest rate of 5.871 per cent. That funding, which was the longest duration for such a bond issued by an Irish bank, was more than seven times oversubscribed.

The bank also launched a tender offer on Wednesday to buy back older AT1 notes originally issued in October 2019, when €500 million was raised at an interest rate of 5.25 per cent. The bank said it expects the results on April 30th.

The bank said the lead arranger group on the AT1 issue was Bank of America, Goldman Sachs, Goodbody Stockbrokers, JP Morgan, Morgan Stanley and UBS.

Ciara O'Brien

Ciara O'Brien

Ciara O'Brien is an Irish Times business and technology journalist

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