Permanent TSB (PTSB) raised €125 million selling the riskiest form of bank debt on the market on Wednesday, benefitting from renewed interest in the sector on the back of positive news on the Covid-19 vaccine front in recent weeks.
The bank placed the bonds, known as Additional Tier 1 (AT1) notes and which count as part of its capital reserves, to carry a coupon, or interest rate of almost 7.9 per cent.
The rate was higher than the 6.25 per cent AIB achieved for similar bonds in June and the 7.5 per cent coupon attached to Bank of Ireland AT1 securities issued in May. This reflects a market view of PTSB’s smaller scale and lower level of underlying profitability compared with its larger rivals.
However, market sources said the PTSB deal would have been priced at 9.5 per cent had the bank gone to market two weeks’ ago, before it emerged that two candidate coronavirus vaccines had proved to be more than 95 per cent effective in advanced clinical trials. The Iseq financial index, dominated by the three Dublin-listed banks, has rallied more than 25 per cent since the results of the first pipeline vaccine, being developed by Pfizer and German group BioNTech, was announced on Monday last week.
"The market backdrop was very supportive for this deal," Declan Dolan, PTSB's group treasurer, told The Irish Times. "We had over 80 orders in the book [for the notes]."
Appetite for the deal was also helped by news late last month that PTSB had agreed to sell €1.4 billion of interest-only buy-to-let loans. This will free up to €200 million of expensive capital held against the portfolio.
Analysts expect PTSB to use the proceeds from the deal to refinance €125 million of AT1 notes that it issued in 2015 but which can be redeemed from next April. These notes carry a coupon of almost 8.63 per cent.
Morgan Stanley, Davy, Goldman Sachs and NatWest Markets worked on the deal for PTSB.
