Robust investment interest enabled Allied Irish Banks (AIB) to reduce the offered interest rate while gathering €625 million in new funds, the bank reported on Wednesday. They specified that the attraction to the Additional Tier 1 (AT1) perpetual bond was high, reaching €3.2 billion at its peak. This provided the opportunity for the bank to adjust the offered investors’ interest rate from an initial 7.625% to 7.125%.
AT1 bonds hold the potential for converting to equity or complete write-down, should the bank’s capital strength, namely its Common Equity Tier 1 (CET1) ratio, dip under 7%. Being perpetual bonds, they lack a maturity date. Considering the amplified risk for investors compared to other debt varieties, AT1 bonds are typically the top-yielding bonds that investors can purchase within the banking sector.
The bank reported majority of the new funding backers were premier asset managers, with UK investors contributing 40%, French investors at 20%, and 15% hailing from offshore US funds. According to them, this raised capital will aid the banking group in meeting regulatory capital requirements.
AIB’s chief executive, Colin Hunt, expressed satisfaction with the continued investor interest in their bond issuance. He referred to the investors’ interest in the released perpetual bond as another signal of continued faith in the bank, as they embark on executing their new three-year strategy with an invigorated group.
This fundraising drive follows the previously issued 10-year senior bond in March that raised $1 billion at an interest rate of 5.871%. This offering, the Irish bank’s longest duration for this bond, was subscribed to more than seven times over.
On Wednesday, AIB also announced a tender offer to repurchase older AT1 notes originally put forth in October 2019, when they raised €500 million at a 5.25% interest rate. The results of this are expected on April 30th.
AIB named the lead arranging group for the AT1 issue as Bank of America, Goldman Sachs, Goodbody Stockbrokers, JP Morgan, Morgan Stanley, and UBS.