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On the road: Bank of Ireland goes global to sell its first covered bond issue Back  
In September 2004, Bank of Ireland raised €2 billion in the first Irish mortgage backed asset covered securities (ACS) transaction. Vincent Digby describes how Bank of Ireland went on the most comprehensive debt roadshow ever undertaken by the bank, which saw three teams travel across Asia, Scandinavia and continental Europe, to sell this transaction.
AAugust 2004 and during the summer Bank of Ireland (BOI) has been busier than usual. Just as recently as July 2004 it had established Bank of Ireland Mortgage Bank a completely new licensed bank into which it transferred almost €9 billion of existing mortgages.

The mortgage bank would then be the first ever Irish issuer of mortgage backed asset covered securities (ACS). This would be the culmination of many months of intense project work involving Bank of Ireland Mortgage Business and Bank of Ireland Global Markets. We were supported by our advisors McCann FitzGerald, PricewaterhouseCoopers, Barclays Capital (our arranger), Davy Stockbrokers, the Irish Bankers Federation (IBF) and the Irish Financial Services Regulatory Authority (IFSRA).

The transaction was intended to raise €2 billion and was scheduled for September 2004. Bank of Ireland Global Markets would be responsible for marketing and executing the transaction. We in global markets were acutely aware of the importance and significance of the inaugural transaction. As this was the first tranche of a planned €10 billion programme it would set the price level for future issues. As the first ever issuer of a mortgage backed ACS, we would be responsible for introducing, explaining and championing the mortgage backed ACS to a sophisticated and discriminating global investor base. So, no pressure there then!

We are going global!
‘How do we market this deal in a manner which delivers a successful transaction, reaches a global investor base and leaves the market eagerly anticipating our next transaction?’ This was the question on the table at a pre-launch meeting attended by Mick Sweeney, chief executive, BOI Global Markets, Joe Larkin, managing director of the mortgage bank, Sean Crowe, director of trading, global markets, and Vincent Digby, head of funding, global markets. The conclusion reached at that meeting was that the only way our objectives could be achieved was to prepare and execute the most comprehensive debt roadshow ever undertaken by Bank of Ireland.
In fact, given the relatively short time frame between announcing the deal and pricing the transaction, it was agreed that three roadshow teams would be required to meet with investors in all the main financial centers of Asia and Europe. In order to fully demonstrate our clear commitment to this transaction, the ACS product and our ACS programme, we enlisted three of Bank of Ireland’s most senior executives to lead each roadshow team.

Saturday, 28th of August - Asia
Our Asian team, led by Denis Donovan, head of wholesale financial services, supported by Mick Sweeney, global markets and Fiona Ross, head of investor relations flew to Tokyo. For the next week they met with investors in Tokyo, Taipei, Hong Kong, Singapore and Beijing. Barclays Capital were responsible for arranging the meetings in Asia. At each of those meetings the team gave presentations on the structure, strategy and performance of Bank of Ireland. Mick Sweeney described in detail the ACS product, the structure of our transaction and our issuance strategy. The Asian team also had several press briefings during the week, including a television interview on CNBC Asia.

The team approached the week from the perspective that their audience would not have any detailed knowledge or understanding of the Irish economy. They were determined that, by the end of the week this would change and furthermore that we would have material Asian orders for the transaction.

Tuesday 31st of August - Europe
Our two European roadshow teams flew to their first destinations. Europe Team 1 met with investors in Helsinki, Stockholm, Copenhagen, Oslo, Brussels, Luxembourg Amsterdam, Utrecht, Paris, London and Edinburgh. This team comprised of Brian Kealy, head of capital management, Joe Larkin and Sean Crowe.

Europe Team 2 was comprised of John O’Donovan, group chief financial officer, Frank Ryan, group financial controller, and Dan McLaughlin, chief economist. Our itinerary included Zurich, Geneva, Milan, Vienna, Munich, Frankfurt, Cologne, Madrid and Dublin.

Both of Bank of Ireland’s European teams were aware that they were traveling to meet the core European covered bond investors, and so could expect a sophisticated and well-informed audience who would have highly technical questions on the ACS product. This audience would also be the backbone of our potential order book. Further motivation was added via an inter-team challenge, as to which team would bring in most orders.

The meetings were arranged by the lead managers, Barclays, Citigroup, Deutsche Bank and Davy, and were scheduled to finish on the 9th of September.

Our last day of the roadshow was in Dublin, starting with a breakfast presentation in the IFSC, which was arranged by Davy. This first meeting produced an impressive turnout. It is reassuring for the future of Ireland’s financial services industry that the IFSC is now a very significant buyer of all types of debt and is now a must visit roadshow location.

It is also good to get in front of your domestic audience, a little daunting perhaps but very worthwhile. The remainder of the day was comprised of one to one meetings with domestic fund managers. The degree of product knowledge demonstrated by our domestic fund managers stood in very favorable comparison with anything we had encountered on the road.

The moment of truth - Monday September 13th
8.00 am: The order book opened. Orders placed over the morning would confirm without any doubt whether the extensive roadshow had realised our objectives. The price range was announced as mid swaps + 3-4 bps. Our objective was to have a €2 billion deal with strong over-subscription.

9.30 am: Within an hour an a half, we had over €4 billion of orders mostly at re-offer, an astounding result but a success that we had to manage. At this stage we recognised that the over-subscription would be much greater than we had hoped for, but now we had a responsibility to the investors who had supported the transaction by getting their orders in early; we had to limit the over-subscription. After a brief conference call between ourselves and the lead managers we decided to close the book at 11.00am with only Asian orders allowed overnight.

Tuesday, 14th September
By 8.00am on Tuesday, 14th September, Bank of Ireland Mortgage Bank’s orderbook was formally closed with over €6.5 billion of orders secured, allowing us to price our €2 billion transaction at mid swaps + 3bps.

The real benefits of the extensive roadshow were apparent not only in the speed and scale of the over-subscription but also in the breadth of investors - over 130 investors from 23 countries.
The quality of the investor base was also significant in that over 75 per cent were real money accounts with material allocation to fund managers and central banks thus delivering real investor diversification.

The geographic distribution gave real satisfaction to the Asian roadshow team, in that they achieved one of the highest Asian allocations ever recorded in a covered bond transaction.
The split was as follows: Asia 11 per cent, Germany 43 per cent, Ireland 8 per cent, Skandis 9 per cent, UK 4 per cent and rest of Europe 25 per cent.

As for which of the European teams brought in most orders… modesty does not permit me to reveal the answer!

In the final analysis, the deal was an overwhelming global investor vote of confidence in Bank of Ireland, the Irish Asset Covered Securities legislation and the strength of the Irish economy.

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