What: USD 1bn of Anglo Irish Bank senior bonds, not covered by the September 2008 guarantee, not secured against Anglo assets. The bonds were originally issued on 2nd November 2006; the ISIN reference for the bond is XS0273602622. You can view its price and its history here. It was trading at 52c in the dollar earlier this year. The bond is denominated in US dollars; at the current exchange rate of EUR 1 = USD 1.37, the bond works out at €730m. Anglo is set to receive a total of €29.3bn from the State.
When: Sometime today 2nd November, 2011
Who (is paying): The bond will be repaid by someone in the Irish Bank Resolution Corporation (“IBRC”, the name of the new company formed by the merger of Anglo with Irish Nationwide Building Society). IBRC’s chief executive is Australian, Mike Aynsley, its chairman is Alan Dukes. IBRC is 100% owned by the State so Minister for Finance, Michael Noonan is the principal Government member responsible for the payment.
Who (is being paid): The identities of the bondholders are not public. Minister for Finance Michael Noonan has described them as “speculative investors”. The Guido Fawkes blog published what it claimed was a partial list of bondholders last October 2010. Senator David Norris began naming them in the Seanad last December 2010 but was told by the chairman Pat Moylan that he was out of order.
Where: The payment will be made by IBRC whose head office is at 18/21 St Stephen’s Green, Dublin 2,
Why: Not clear; but NOT because it is a term of the Memorandum of Understanding with the bailout troika of the IMF/EU/ECB; not because it is in any public agreement with the ECB. Probably because of a political fear that non-payment will jeopardise the continuing €150bn loans provided by the ECB to Irish banks, or will sour the relationship with the Troika so that the continuation of the bailout to the end of 2013 would be put at risk. There has also been some recent talk suggesting that acquiescence now with the ECB’s wishes may result in a reduction in the interest rate charged on future borrowings to fund IBRC.
UPDATE: 2nd November 2011. So the USD $1bn Anglo bond was paid today. Political protest was concentrated in the Dail where Opposition parties called on the Government to hold an emergency debate on the payment – that call was defeated by 77 votes to 38. Sinn Fein called on the Government to ring the chairman of Anglo (or IBRC as it is known now) and instruct him not to pay the bond. Both Sinn Fein and the United Left Alliance walked out of the chamber in protest at the payment and refusal to debate the matter. Sinn Fein’s walkout was met with guffaws from the Fine Gael/Labour benches. The Taoiseach confirmed that the payment made today was not a condition of the Memorandum of Understanding with the troika of the IMF/EU/ECB but did allude to it being consequent to a “commitment” made by the last administration. The Taoiseach said the Government had tried to convince the ECB of Ireland’s case in imposing a haircut on these bonds but that the ECB had been trenchantly opposed. He claimed on one hand that he did not know the identities of the bondholders to, only a few moments later, claim that the bondholders included local councils and non-payment of the bond would result in the loss of jobs – Minister for Social Protection, Joan Burton nodded vigorously along to that claim. The Taoiseach said he did not try to raise the Anglo bond issue at last week’s EU summit because the summit agenda had been set by others and was confined to discussion of the Greek situation, the recapitalisation of EuroZone banks and the expansion in the bailout facility (the EFSF).
This blog sets out to be politically impartial but it seems unavoidable to comment on the poor defence of the Government’s position today. Notwithstanding the fact that Ireland is a minnow in the EuroZone, and Greece’s woes are hogging the headlines, it seems shameful that there was not even an attempt to get the Anglo bond on the agenda last week at the EU summit, even as a subsidiary matter. The Taoiseach seemed visibly shaken when Sinn Fein walked out and it was with a cracked voice that he sought to justify his position in rejecting a debate. The Taoiseach’s contribution in the Irish Times today seems to evidence a communication strategy to manage the public mood this week.
What appears completely cynical is the delay in the publication of the Comprehensive Spending Review. This is a review of Government expenditure in the public sector and was to identify cuts and savings (remember €2.1bn of the €3.6bn budget adjustment next year is to come from these cuts and savings). According to the Memorandum of Understanding with the Troika the review was to have been completed in September 2011 (by the end of Q3, 2011). When Fianna Fail leader Micheal Martin asked the Taoiseach in the Dail for the review in October, he was told it wasn’t yet complete.
There is a second document, called the 3-Year Plan, which Minister for Finance, Michael Noonan said would be published in October 2011. The aim of this document was to set out “in as much detail as possible” the levies and taxes that would be imposed in the next three years, so as to give people clarity and certainty about future taxes, so that society and the economy might have some confidence in making spending decisions. Again, this document has not been published, but the Department of Finance is indicating it will be published on Friday 4th November.
Both documents, which were due to be published before today, will be deeply unpopular in the sense that they will make more tangible, the austerity to be endured so as to cut the deficit (the difference between the Government tax take and Government expenditure) AND to pay bondholders. Could this Government be so naïve to think that by Friday this week, the memory of the €730m bond payment will have greyed?