“It was a very smooth execution,” said a head of SSA syndicate at one of the leads. “It all came together and we got a very strong response. There does not appear to have been any contagion to Ireland as a credit from the Catalan situation.”
“The tone in markets is pretty risk-off — Bunds are well bid — but it didn’t appear to make a difference to the appetite for this deal,” said the banker.
The sovereign hit screens on Monday, mandating BNP Paribas, Citi, Davy, Goldman Sachs, NatWest Markets and Société Générale to sell a five year Reg S benchmark. Leads decided not to run the deal on Tuesday because of a public holiday in Germany, electing instead to start proceedings on Wednesday morning.
The leads circulated initial price thoughts of low 20s through mid-swaps before opening books at around 9.45am London time with price guidance of mid-swaps minus 23bp area. Indications of interest were in excess of €6.4bn, including €950m of orders from joint lead managers. As the book grew, leads shaved a basis point off the spread, which was set at minus 24bp with €9.6bn in the book. The reoffer yield of minus 0.8bp makes this Ireland’s first negative yielding bond.
Ireland has outstanding bonds maturing in March 2022 and March 2023. “There was only a 5bp curve between the two bonds, so we were able to simply interpolate the curve between them,” said a head of SSA syndicate at one of the leads. “That gave us fair value of minus 27bp.”
Books closed at around 1.30pm London time with orders over €10.1bn, including €1.361bn from the leads.
The proceeds of the bond will go towards paying off Ireland’s remaining €5.5bn of bailout loans from the IMF, Sweden and Denmark. Ireland announced on Monday that it intends to repay early its remaining €4.5bn loan to the IMF as well as €600m to Sweden and €400m to Denmark. The National Treasury Management Association (NTMA) estimates that the early repayment should save the Irish Treasury €150m.
Elsewhere, the European Financial Stability Facility has sent out a request for proposals to banks for a bond expected next week.
