independent

Saturday 19 April 2014

Permanent TSB 'has the money' to pay maturing bonds

STATE-owned Permanent TSB has the money in place to meet €2.7bn of bond debt due to be repaid by the bank in the coming months without issuing new bonds, the bank said in a statement.

The debts falling due include a $1.7bn (€1.2bn) bond that matures in just two weeks, and a second bond due to be repaid in April.

The payments can be met without issuing new bonds, or using up any of the €4bn of capital injected by the government to rescue 'Permo', which was the last of the banks to be taken into state hands, the bank said after an analyst suggested it might sell bonds this week.

"Permanent TSB has already secured the resources to finance upcoming bond maturities including a maturity due this month, and will not be required to issue any bonds in the near future.

"In tandem with its restructuring plan, the bank has plans in place to cover its liquidity and financing requirements through the coming months and has sufficient collateral in place to raise funds as necessary," the bank added.

The money to repay the bonds has been raised through new borrowing agreements put in place with private sector lenders and not by increasing borrowings from the European Central Bank (ECB), the Irish Independent has learnt.

The new financing agreements are understood to be secured against a portion of the bank's collateral, including some of its portfolio of mortgage debt.

Refinancing

Such a 'refinancing' means that Permanent TSB will not be any less indebted once the bonds have been repaid, because new loans are being taken on to make the payment.

However, rolling over the debt means the bank will not have to use up any of the capital injected by the State to prop up its balance sheet in order to meet the repayments, nor will it be forced into a 'firesale' of assets to raise the cash.

Permanent TSB issued its statement in reaction to speculation from analysts at Glas Securities that the bank could try to issue bonds in the coming days in order to fund the bond repayments.

The looming bond repayments are just one of the question marks that had been hanging over Permanent TSB going into 2013.

The other big issue is whether it starts lending out mortgage debt in a meaningful way over the course of this year.

The bank's 'public interest directors' insisted at a meeting of the Oireachtas Finance Committee in December that lending in the year ahead would increase from the €70m of new loans issued in 2012.

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