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Innovative capital markets deals by Irish Back  
Anglo Irish Bank has become the third Irish mortgage bank to issue covered bonds, following its establishment of a €2 billion covered bond programme. However, the programme has been established in the UK, outside the framework of the Irish legislation on asset covered securities. The bonds will be backed by a cover pool of UK commercial mortgage loans that have been originated by Anglo Irish. Securitisation techniques were used in order to, i) ring fence the cover pool in the event of the insolvency of the issuer; ii) mitigate the risks associated with the credit deterioration of the swap counterparties and of the cover pool; and iii) mitigate any refinancing risk, through the extension features contemplated in the terms and conditions of the covered bonds.

The cover pool comprises a relatively concentrated pool of commercial mortgage loans. In particular, the borrower and property diversity is lower than for other cover pools. Moreover, properties securing the mortgage loans comprise of a significant portion of specialty and operating assets. The programme has been assigned provisional (P)Aaa rating by Moody's.

The Government recently published its draft bill, the Asset Covered Securities (Amendment) Bill 2007, which will amend the existing legislation. The bill proposes the introduction of a number of new features, including the eligibility of commercial mortgages and securitised mortgage loans as backing for covered bonds.

The ICS Building Society has also been active in raising funds via its mortgages. It chose a securitisation vehicle, Kildare Securities Ltd., to raise €2.75 billion. The deal is the firm's first securitisation transaction, and the first Irish mortgage-backed securitisation involving a building society under the new true sale legislation. The pool comprises €3.1 billion of residential mortgages.

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