The first-ever Irish residential mortgage covered bond went on a marketing blitz in Europe and Asia last week. Analysts said it drew some attention from ABS investors, who seem to be getting more keen on covered bonds as an RMBS alternative.

The Bank of Ireland Mortgage Bank, a wholly owned subsidiary of the Bank of Ireland, expects its inaugural deal to total about 2 billion ($2.44 billion), with the final maturity between five and seven years.

The on-balance-sheet deal, rated a preliminary triple-A from Moody's Investors Service and Standard & Poor's, is backed by first-lien mortgages on about 20,000 Irish homes. Barclays Capital, Deutsche Bank Securities, Citigroup Global Markets and local concern Davy are the selling group.

Price guidance was not available at press time, but several sources expected a Friday conference call to include preliminary spreads. It was unclear how soon after the call the deal might price.

The issuer is set up to offer as much as 10 billion ($12 billion) of asset-covered securities over the next five years. The bonds will be structured as bullet maturity notes, a presale report issued by S&P.

Although this is the first residential mortgage covered bond from Ireland, there have been two public sector issues under the country's Asset Covered Securities legislation, which was enacted in 2001. They came from Depfa Bank and West LB. Depfa introduced the first covered bond last year, issuing a five-year deal worth 5 billion ($6 billion) in February and a 10-year deal for 3.5 billion ($4.28 billion) in May. West LB issued a five-year, 2 billion ($2.4 billion) deal in October 2003.

Ireland is the latest country to develop an asset-backed bond market along the lines of the German Pfandbrief. The Irish legislation allows designated credit institutions to issue securities collateralized either by residential and commercial mortgages, or loans to the public sector. Although not placed in a bankruptcy-remote vehicle, the assets are ring-fenced from other creditors, making investors first in line to get paid in a bankruptcy.

Unlike U.K. issues, these are not structured covered bonds, due to the enabling legislation, but at least one analyst said he expects interest from asset-backed investors nonetheless. Analysts also said they expect to see more covered bond volume in Irish RMBS going forward. S&P analyst Cian Chandler, based in London, said several other potential issuers are looking into the option.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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