McKinsey's €2.75m deal to sort out Anglo debt is extended
THE Department of Finance has extended McKinsey's "thousands of euro a day" contract so that the top-tier consultants can advise on the Government's efforts to cut the cost of the Anglo Irish Bank bailout.
Finance Minister Michael Noonan confirmed the extension yesterday, as he admitted that efforts to reduce the bailout's €47bn cost would not be "concluded in the short term".
McKinsey was first retained by the National Treasury Management Agency last summer to advise on the merger of Anglo Irish Bank and Irish Nationwide, which have since become the Irish Bank Resolution Corporation (IBRC).
The initial contract ran from May 16 to December 31 and earned the consultants a fee of €2.75m -- or about €360,000 a month.
In a written response to a question from Sinn Fein's finance spokesman Pearse Doherty, Mr Noonan revealed that McKinsey's "engagement" had been "extended for a further number of weeks".
The consultants are now involved in the "ongoing discussions on funding options for IBRC (including promissory note) and related matters," Mr Noonan added. He declined to give details of McKinsey's fees, but said it would be paid for by his department.
As previously reported by the Irish Independent, McKinsey typically charges more than €3,000 a day for "partner-level resources" and more than €500 a day for more junior staff.
McKinsey's latest engagement involves the Government's bid to cut the burden of the €30bn IOU -- dubbed a promissory note -- that was used to bail out Anglo and which imposes a €3bn a year cost on the exchequer.
The EC/ECB/IMF troika has agreed to develop a technical paper on ways to restructure the bailout. Mr Noonan said that "in tandem" with that work, he had "commenced an intensive campaign at political level to garner support".
Last week, he met ECB president Mario Draghi and EC economics chief Olli Rehn. Yesterday, he said he had also "discussed the matter with a number of (his) ... counterparts from other member states".
Mr Noonan continued: "Given the nature of advocacy and the decision-making process in the EU, I would not expect this matter to be concluded in the short term."
In Dail debates, Mr Noonan also insisted that Ireland was not talking about "resigning in any way" from its Anglo obligations or trying to get a write-off of any of the bank's debts.
Instead, the Government was concentrating its efforts on having the promissory note "replaced with an alternative financial instrument of lower coupon and longer duration".
This newspaper understands that this new instrument would ideally be provided to Anglo by Europe's bailout fund. Ireland could then repay the bailout fund over a longer period.