The first unsecured or unguaranteed debt to be issued by an Irish bank since the bank guarantee was introduced, Bank of Ireland’s subordinated debt of €250 million, is expected to be assigned a “B” rating, credit rating agency Standard and Poor’s said.
The agency said that it expects to assign the rating to the bank’s proposed new dated 10-year subordinated debt. The bank’s capital and earnings were described by Standard and Poor’s as “weak”.
The ratings agency noted that the State authorities “remain ill disposed to subordinated bondholders in light of the Government bailout of the Irish banking system.”
Standard and Poor’s said that the bank had a “weak track record” with respect to subordinated bondholders.This was as a result of several liability management exercises in recent years in which the bank imposed losses on subordinated bondholders to share in the cost of its recapitalisation.
The agency raised the rating on the bank’s existing dated and junior subordinated debt and preference shares to “B-” as it considers that “the proposed new issuance shows intent by Bank of Ireland to rebuild its standing in the debt markets.”
Bank of Ireland said this week that it has raised €250 million of new 10-year subordinated debt, paying a coupon or annual interest rate of 10 per cent, in a debt issuance that was three to four times oversubscribed by lenders.
