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Bank of Ireland's RMBS Buyback Gives Investors an Out

The Bank of Ireland has offered to buy back up its Kildare and Brunel securitizations at between 28% and 88% of par. It stated that the move would reduce its regulatory capital by up to €300 million ($400 million).

The tender is positive for investors because it suggests liquidity as well as a possible early exit from a generally very illiquid market, Bank of America Merrill Lynch explained in a report.

"The feel good factor for investors is certainly there, but we fail to see how a bank could achieve a cheaper funding than the launch spreads of these deals warranted — the potential offsetting argument could be the access to the structured finance markets in the future, if this action results in the potential investor acceptance of future RMBS deals," said the analysts in the report.

Bank of Ireland's tender for Kildare RMBS sets minimum prices for the A2 and A3 notes at 88% and 66% respectively; and for the B,C and D notes at 41%,36% and 28%,respectively.

According to BofA Merrill, Markit price data as of Nov. 18 had the A2 and A3 prices mid spot on the tender minimum prices, Class B was at 45% and Class C and D were much lower at 23%/16%.

"Kildare RMBS is possibly the best-performing shelf among Irish RMBS," they said. "Moreover, Class A2 is particularly well-insulated against both the deterioration in performance and a slowdown in CPR. We think investors may be better off holding on to this paper, however, we view the rest of the offers as attractive."

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