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Issuers transact a number of firsts in innovative year Back  
Ireland’s first whole business securitisation, and the increasing popularity of private placements, which are now a more popular funding instrument than corporate bonds, are ‘trends that are expected to continue’ over the coming year, say leading market practitioners, while growth in syndicated loans, which exceeded €13 billion in 2005, is also set to continue into 2006.
The first whole business securitisation by Real Estate Opportunities, a subsidiary of Treasury Holdings, and Anglo Irish Bank’s €430 million Tier 1 Capital deal, which was the first time that a preference share structure was used to raise Tier 1 Capital by an Irish bank, were two of the new innovations present in the Irish capital markets in 2005.

The private placement market also grew in popularity during the year, with Grafton Group, Quinn Group and Kingspan all accessing the US markets during the year, raising €325 million, $300 million, and $200 million respectively. The market has become more attractive for Irish issuers than corporate bonds, as there is a strong demand for European credits, and the market can be very flexible and tailored to the specific requirements of the issuer in areas such as maturity (out to 30 years), structure and terms, competing very effectively with bank terms and pricing.

Ciaran Kane, head of treasury with Barclays Bank, says that private placements are an attractive funding source for Irish corporates, and more accessible than the public bond markets for a number of reasons, including the fact that the market is open to unrated issuers (saving on the financial and administrative aspects of obtaining a rating), who have the ability to complete a deal from end to end in a relatively short space of time due to the limited number of investors. ‘There is also a less onerous reporting regime than would apply in a bank financed deal,’ he said, adding that, ‘this is a trend that we expect to continue’.

The Irish securitisation market was also quite buoyant over the past year, with two notable deals, including the first first commercial mortgage-backed securitisation (CMBS), which was transacted by Real Estate Opportunities, a subsidiary of property development firm Treasury Holdings. In February of this year, the firm raised €375 million by securitising 16 retail and office properties in Dublin and Cork. According to finance director Guy Leech, the firm was looking to refinance its debt, in order to achieve annual interest savings of about €3 million, repay existing bank debt, and free up cash for further expansion opportunities. Securitisation was chosen, says Leech, ‘because it had become much cheaper’, and there were other attractions in respect of limited amortisation and covenants.

With the first ‘whole business securitisation’ now transacted, expectations are that another Irish issuer will use this funding vehicle. According to Hugh Beattie, a partner with McCann Fitzgerald, ‘The fact that this deal brought real and substantial funding cost-savings, as against ordinary secured bank finance, means that large borrowers should be considering this type of structure as a very real funding option. The deal achieved effective ‘off balance sheet’ pricing with an ‘on balance sheet’ structure - it is inevitable that more deals will follow’.

Also during the year, First Active issued once more under its Celtic programme, in a €1.75 billion residential mortgage backed securitisation (RMBS).

Syndicated loans were also a popular funding vehicle over the past year, and published deals grew by 50 per cent to total €13.3 billion in 2005, according to Bank of Ireland.

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