Investors have marked down two risk transfer deals with Bank of Ireland Group Plc as underlying loans deteriorate, highlighting hazards in the booming market. Arrow Mark Financial Corp. valued remaining bonds from a 2021 transaction at 34 cents on the dollar, down 43% since year-end, while First Trust Alternative Opportunities Fund marked its 2024 SRT position at 91 cents, from over 100. Both instruments are part of Bank of Ireland’s Mespil program, used to hedge credit risk on acquisition finance. The writedowns reflect poor performance of US and European portfolios, with coupons exceeding 13%. Despite opacity, SRT issuance has surged, enabling lenders to offload risk tied to $1 trillion in loans. Bank of Ireland is winding down its US loan book and partnering with Kennedy Lewis for European mid-market buyouts. Future Mespil deals will reference only European debt. Arrow Mark also marked down Banco Santander and Goldman Sachs-linked notes, though both were mostly amortized. The firm cited investor interest in SRTs for their cash flows and resilience.
Bank of Ireland’s Mespil program typically issues one SRT every 12–18 months and may return in H1 2025. The lender declined to comment; First Trust and Arrow Mark did not respond. The writedowns contrast with wider SRT portfolios valued near par, potentially influencing future pricing.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing