Anglo Irish Bank is issuing the first covered bond backed entirely by commercial mortgage assets and bypassing the CMBS market. The bank will be making its debut on the covered bond market with a €2 billion programme. The structure of the issue will be broadly similar to conventional UK structured covered bonds, differing only in the make-up of the cover pool. Anglo Irish Bank’s focus is on commercial lending but Irish ACS regulations limit the proportion of commercial mortgage assets in the cover pool to 10%, so the bank is issuing outside the legal framework.
Issuing this covered bond now raises the question why the bank didn’t wait for the forthcoming amendment to the Irish ACS regulations that would allow for covered bonds backed by exclusively commercial mortgage assets. "We planned this issue some time ago," says John Bowe, director in the capital markets division of Anglo Irish. "We had no certainty that the legislation would be passed, or what the timetable for it would be."
Another reason for not waiting to issue an Irish ACS under the new regulations is that to do so would require Anglo Irish to set up a separate ACS bank.