Wednesday 21 March 2018

NTMA buys back and cancels €500m batch of bonds linked to former Anglo Irish Bank

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Stock photo
Donal O'Donovan

Donal O'Donovan

The NTMA has bought back and cancelled the latest €500m batch of bonds linked to the liquidation of the former Anglo Irish Bank.

The bonds bought back from the Central Bank were issued in 2013 as part of the liquidation of Irish Bank Resolution Corporation (IBRC).

That complex deal saw the Central Bank acquire €25.03bn of eight long-dated so-called Floating Rate Notes (FRNs), and €3.461bn of the Irish Government 2025 Fixed Rate Bond, which was due to mature in March 2025.

The NTMA has been buying the FRNs in batches of €500m from the Central Bank in order to tear them up. If the bonds went to another owner the interest would have to be paid, in the case of the latest bond purchased, until 2043.

Controversially, the Central Bank destroys the money it receives from the State when the purchases happen as part of its management of the amount of money in circulation.

The Central Bank originally received the bonds as part of the liquidation of the IBRC in February 2013 - the so-called 'Prom Night'. But the Central Bank had to agree a disposal schedule for the debt with the European Central Bank because it is not allowed to lend to the State.

In the latest transaction, the NTMA announces the cancellation of €500m of the Irish Floating Rate Treasury Bond due to mature on 18 June 2045. Following this cancellation, the total nominal outstanding for this bond will reduce to €2.5 billion.

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