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Archive for February 8th, 2011

Significantly this time, reporters from the paper of record, the Irish Times and State-broadcaster, RTE were allowed sit in on the court proceedings at the High Court this morning where certain directions were sought and granted in respect of Anglo Irish Banks and Irish Nationwide Building Society (INBS). RTE is reporting on proceedings. This contrasts with the controversial exclusion of Irish Times journalists at a hearing before Christmas when certain orders were requested in respect of AIB.

Last week, a restructuring plan for both zombie institutions was sent to the European Commission and although a formal decision has not been issued by the Commission, it was reported that Competition Commissioner, Joaquin Almunia was pleased with the plan (fifth time’s a charm following the previous Anglo restructuring plan submissions).

The main outcome from this morning’s proceedings was the direction to the NTMA to auction off (“invite tenders” according to the NTMA press release) the deposit books of Anglo and INBS which were reported two weeks ago to contain €18bn of deposits (“less than “ €14bn at Anglo and €4bn at INBS). There is a further press briefing here from the Department of Finance. The Wall Street Journal is incorrectly reporting that NAMA will undertake the auction – the paper seems to be confusing NAMA (National Asset Management Agency which manages €90bn of property related loans) with the NTMA (National Treasury Management Agency which manages the national debt, the pension reserve and has overall responsibility for NAMA as well as some ancillary functions).

Lastly it is stressed by both the Department of Finance and the NTMA that this direction does not affect the security of depositors who can withdraw their funds at any time including during the auction process.

UPDATE: 9th February, 2011. The Central Bank of Ireland has issued a brief statement on the deposit moves which is noteworthy for describing the forthcoming move as a “transfer” rather than “sale”.  INBS and Anglo have both issued statements but they don’t add anything to what is reported above.

UPDATE: 15th February, 2011. The Direction Orders are now available for Anglo and INBS. Sadly the Restructuring Plan referred to is not available.  There is little in the Orders that has not been reported in the press though there seems to be confirmation that both organisations will be around until 31st December, 2012 at least (because that’s a date referred to for the disposal of loans)

UPDATE: 22nd February, 2011. The Independent reports that the auction has been deferred to later this week. The newspaper brings us other, previously undisclosed, details of the auction. The bidders are said to include Irish Life and Permanent, Bank of Ireland, AIB and EBS (apparently backed by Cardinal which is bidding for EBS at present). The auction is not simple as bidders must apparently make quantitative bids on the % of the deposit book to be paid as a premium, the % of deposits it is bidding on as apparently it doesn’t have to be 100% and qualitatively on the type of asset it will accept. There is no update on the Fir Tree action which could delay the auction.

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Back in September and October, 2010 before the IMF came to town and Minister for Finance Brian Lenihan was talking about us being fully funded to the middle of 2011, and following the alarm that greeted the NTMA’s decision to withdraw from bond auctions there were some confusion over how exactly we were fully funded to “the middle of 2011” when we had substantial debt redemption, a still shaky banking sector whose capital demands were going in one direction only and a crippling deficit with limited political will to balance the books. Indeed just before the IMF deal was announced there was a piece on here which answered Minister’s Lenihan challenge to “work it out for ourselves” the bailout needed from the IMF. Included in that estimate on here of over €200bn was the redemption of maturing national debt of €38bn in 2011-2014. The issue of debt maturity and redemption didn’t go away. Well finally it looks as if the mystery of how we’re going to fund these redemptions is going to be explained by the NTMA.

According to the latest NTMA debt maturity profile shown above, we will have nearly €14bn of national debt maturing this year comprising €4.585bn of bonds, €6.977bn of short term debt (understood to be Treasury Bills) and €1.083bn of retail debt and €1.035bn of other debt. And it would seem that we will be using something called “Liquid Assets *” to fund redemptions. This new category of “Liquid Assets *” is not explained by the NTMA and funnily enough is shaded a Barney-the-Dinosaur shade of purple on the NTMA website. How fitting perhaps that a colour more associated with a fantasy toddlers character is what we will use to repay maturing debts.

A query has been sent to the NTMA asking for an explanation of “Liquid Assets *”. This entry will be updated with any response but I leave you with what might be the NTMA’s communication to bondholders and others whose instruments mature in 2011 and who might be expecting payment from the Irish state (given that €44bn of the bailout is needed for the deficit, €5bn for NAMA and €35bn for the banks, though €25bn is claimed to be a contingency for the banks, there wouldn’t seem to be any funds left for debt redemption)

UPDATE: 29th May, 2011. Minister for Transport (not Finance), Leo Varadkar is reported today to be suggesting that Ireland will need an additional bailout so as to be able to fund maturing debt, that is bonds and treasury bills that were issued for a fixed period by the Irish state and which are now coming due for repayment. Thankfully not all of the €35bn bailout from the IMF/EU which had been earmarked for the banks will be needed – the stress tests in March 2011 identified a €24bn need and although we still haven’t seen the results of the Anglo and INBS stress tests, we are assured by Minister Noonan that they won’t show anything “untoward” which presumably means they won’t need additional funding; that being the case there may be €11bn of a “saving”, possibly more if bondholders accept a haircut on their bonds, and some of that might be diverted to rolling over maturing debt. It probably won’t be enough however as the maturity profile shown above illustrates.

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