Business World

Wednesday 29 March 2017

State presses Trichet to ease 'costly' burden of Anglo notes

A new improvement to Ireland's bailout will see us get a €600m rebate from the rescue fund in 2016

ECB governor Jean-Claude Trichet (L) gestures as chair of the
Economic and Monetary Affairs Committee Sharon Bowles arrives
for family photo at an informal meeting of the Economic and
Financial Affairs Council in Wroclaw
ECB governor Jean-Claude Trichet (L) gestures as chair of the Economic and Monetary Affairs Committee Sharon Bowles arrives for family photo at an informal meeting of the Economic and Financial Affairs Council in Wroclaw

Laura Noonan , in Wroclaw

FINANCE Minister Michael Noonan will use today's much-hyped meeting with ECB chief Jean-Claude Trichet to push for change to the "very expensive" promissory notes used to rescue Anglo Irish Bank -- rather than forcing the issue of inflicting losses on the collapsed banks' senior bondholders.

The minister confirmed his approach to the ECB meeting last night, as he announced that a new improvement to Ireland's bailout would see us get a €600m rebate from the rescue fund in 2016.

The saving was anticipated by the Government and was factored into the €1.1bn a year bailout savings announced earlier in the week, but Mr Noonan said it was still "the icing on the cake" for Ireland.

Today's ECB meeting is expected to feature a showdown over the €3.8bn of senior unsecured debt in Anglo, after Mr Noonan insisted he would raise the issue of forcing bondholders to take losses and Mr Trichet said he remained opposed.

Speaking to journalists in Wroclaw last night after a meeting of European finance ministers, Mr Noonan said the "primary issue" for the talks would be changes to the €30bn of promissory notes used to rescue Anglo Irish Bank and Irish Nationwide.

The notes are effectively IOUs from the Irish Government to give the bank about €3bn a year for the next 14 years. The IOUs are then used by the bank as security to draw down liquidity from the Central Bank of Ireland.

There was an "interest holiday" for 2011 and 2012, but under the current plans, the Government would have to pay interest of €350m on the notes in 2013, escalating every year to a high of €2.15bn by 2025.

"It's a piece of financial engineering that is extraordinarily expensive," Mr Noonan said. "I would like to open a conversation with the authorities here to get a less expensive solution to the promissory notes."

Changes could involve reducing the interest rate, or extending the term of the promissory notes, Mr Noonan said. He declined to speculate on the savings but said they would be more substantial than action on the senior bonds.

The ECB is believed to have reservations about restructuring the notes, since the notes are the basis for tens of billions of exceptional liquidity that the ECB is allowing the Central Bank of Ireland to give to Anglo.

The terms of any restructuring would have to be carefully managed so that they would not affect Anglo's solvency. Mr Noonan has said he will not embark on a restructuring if it could hurt Anglo's financial position and force the bank to ask for new capital.

Asked if Ireland had given up on forcing losses on the senior bonds, Mr Noonan replied "You never say never", but acknowledged staunch European opposition.

Earlier in the day, eurozone finance ministers' chairman Jean-Claude Juncker praised Ireland and Portugal's "strong commitment and determination" to implement their respective bailout plans, while the EU's economics chief Olli Rehn said bailed-out countries must pursue reforms "vigorously".

"We'd want to be cautious, we're only in the programme since last November," Mr Noonan said. "All I would claim is that in our six-month period in government we've improved the situation by constantly renegotiating; we will continue to renegotiate."

Irish Independent

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