Six months after Ireland was rescued from financial crisis with an international aid package, some investors were treating the country as an emerging market.
The reputation of the former AAA- credit rated sovereign was in tatters, and it fell to a team of three officials in the Irish debt management office to try and turn its image around.
The government embarked on a relentless austerity programme that reduced the budget deficit and the open economy has started to grow, bringing unemployment down to a four-year low.
Meanwhile, the debt officials went on a charm offensive to win back investors’ confidence and make sure they understood that Ireland was the success story of the euro-zone crisis.
They succeeded, and Ireland yesterday exited the €85 billion (Dh428.83bn) bailout agreed with the IMF and European Union in 2010 as planned with enough funding from the debt markets to cover costs until 2015.
“Coming back to the very early days of 2011 when we went to meet investors, having traded off a triple-A credit rating, we were now being met by the emerging-markets desks of certain investment houses,” John Corrigan, the boss of the debt office, said in October.
“Happily we don’t meet those any more.”
The decision to engage early, however, proved essential to Ireland’s success. In contrast, Portugal waited more than a year into its bailout before meeting investors ahead of its first foray last year back into bond markets, while twice-bailed-out Greece is due to launch its first official investor relations campaign only early next year.
When Mr Corrigan and his team first hit the road months after the November 2010 bailout, the government – just two months in power – was scrambling to draw a line under a crippling banking crisis.
Yields on 10-year debt were heading towards 15 per cent and commentators were openly debating whether or not Ireland should default.
The National Treasury Management Agency’s (NTMA) gameplan, hatched when it was locked out of bond markets in September 2010 and Ireland hurtled towards the EU/IMF bailout, was based on three simple principles: tell investors the facts, set reasonable goals and return regularly.
“Under-promise and over-deliver” was Mr Corrigan’s mantra for more than two years of intensive roadshows. At one point, the team covered both coasts of the United States, travelled through much of Asia and finished in Japan in just two weeks. Each night, bar three, was spent in a different city.
Mr Corrigan, 66, was joined on the road by the director of funding and debt management Oliver Whelan and Rossa White, the first chief economist appointed at the NTMA, who joined from Dublin-based Davy Stockbrokers just before the bailout.
The trio met 130 institutions in North America, Europe and Asia in May and June of 2011, shortly before Moody’s downgraded Ireland’s credit rating to junk.
Dublin had also begun haircutting junior debt holders in its mostly state-owned banks, complicating matters further.
“The eagerness and willingness to meet us was very encouraging, given we were selling nothing and weren’t going to be selling anything for quite a while, other than a message that the government were serious about,” Mr Whelan said.
Aided by a more benign backdrop in Europe, the story slowly gained traction. One early convert, the US asset manager Franklin Templeton, bought up to 10 per cent of Irish paper in what would prove to be one of the canniest trades of Europe’s debt crisis.
When the NTMA dipped its toe back into markets in January last year with a bond switch, the yield on two-year paper had fallen to just over 5 per cent from a high of 24 per cent.
At the same time, the economy had begun to grow again, the worst of the banking crisis passed and unemployment was showing signs of stabilising. Even though many investors had thick dossiers on Ireland, often the key was to keep it simple.
Mr Whelan recalls how, knowing that Ireland’s double-digit falls in unit labour costs were sure to impress, he would talk about young people he knew who were joining accountancy firms on much reduced starting salaries.
Roadshow participants also point to the professionalism the chief economist Mr White showed, updating yield-hungry investors with detailed 80-page presentations on the state’s rebalancing economy, public finances and property market.
The NTMA drive was also helped by Mr Corrigan’s extensive role – as the agency’s boss he also oversaw Ireland’s “bad bank”, which is now one of the world’s biggest property owners, its pension fund, a unit managing Dublin’s bank stakes and another advising on privatisations. Investors wanted to meet him.
“I think what they realised early on was that there was no point in waiting until your story improves to start marketing,” said a market participant in Irish debt.
“They recognised that if they didn’t tell the story, the narrative would be stolen by someone else. That was incredibly important. They were really well organised. It was a very powerful marketing effort and is a blueprint of how to do it.”
A resumption of treasury bill auctions followed in July 2012, as did the first sale of new long-term debt. A landmark 10-year issue earlier this year ensured Ireland would leave its bailout flush with more than €22bn of cash, almost twice the amount initially envisaged by its international lenders.
It was a long haul, Mr Whelan admits, remembering one occasion when the team arrived after midnight for meetings the next morning to find two of their hotel rooms had been given away and fresh accommodation had to be hastily found down the road.
It was interesting and rewarding work, added Mr Whelan, who like Mr Corrigan joined the NTMA when it was formed in 1991. Before that both men worked in Ireland’s finance department, while Mr Corrigan also spent time at Allied Irish Banks.
“The job was to get Ireland back into the markets in a sustainable way. Clearly all the cards were not in our hands but in presenting the story and going back and back and back, there is a sense of personal satisfaction there,” Mr Whelan said.
As the bailout ends, Irish 10-year debt is trading at 3.5 per cent ahead of a first bond auction programme in four years due to be detailed in January – a move Mr Corrigan said last month would show investors that it is “business as usual” again.
The country’s debt is still rated as junk by Moody’s – much to Mr Corrigan’s annoyance – although it has changed its outlook to stable from negative while Fitch and Standard & Poors have both maintained Ireland on an investment grade rating.
“The people who took on board the credibility of the story back in 2011 made a lot of money by buying our bonds on the secondary market,” Mr Corrigan said. “The people that didn’t are regretting it.”
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