The Bank of Ireland (BoI) is looking to postpone a planned bond issue of €1 billion, after seeking a sudden spike in the interest rates for Irish government debt.
The bank had been planning to launch the huge bond sale on Monday, but the Irish Independent newspaper learned over the weekend that it was being suspended for the time being.
Further sources inside the bank confirmed that that an imminent issuing of bonds was unlikely – a situation that had been further cemented by other recent market developments, including the potential for further clarity on the ultimate cost of the Anglo Irish Bank (AIB) bail-out to come as soon as October.
This furthered the decision to delay, as insiders believe that that improved clarity will improve market sentiment towards AIB and result in a reduced amount of interest for BoI to pay.
BoI had also been considering the extension of elements of the bank guarantee scheme and how that might well buoy sentiment. A major liability management exercise is also underway, with BoI attempting to swap C$400 million (€300 million) of existing Canadian bonds for new ones.
The swap will offer bondholders a higher interest rate in exchange for extended maturity dates. It is hoped it will improve the bank's capital position, as bonds can be carried at a higher value when they are further from maturity.
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