Minister for Finance, Michael Noonan stood up in the Dail shortly after 4pm today to make a special announcement regarding the renegotiations of the Anglo promissory note arrangement which was set to cost the State €3.1bn in cash in the next two days. The Minister’s statement is here and was delivered with An Taoiseach Enda Kenny sitting alongside. Immediately after the statement was delivered, Fianna Fail’s finance spokesperson Michael McGrath and others sought a debate on the announcement, but the Comhairle disallowed the request but suggested the party whips might agree that time be taken from today’s business. An hour later, and it seems that the whips were unable to agree a slot. So right now, all we have is the Minister’s statement. So what do we know
(1) NAMA will use €3.1bn of its €4.3bn cash reserve to buy an Irish “long-dated” government bond, it will presumably be a 2025 bond.
(2) The Govt will give the €3.1bn it gets from NAMA to give to IBRC (the new name for the Anglo/INBS merged entity)
(3) IBRC will give the €3.1bn to the Central Bank ofIrelandto whom it owes €41bn, and the Central Bank will take the €3.1bn outside, douse it with lighter fluid and set it ablaze, or whatever the electronic equivalent is of destroying money which the Central Bank created to lend to Anglo on the strength of Anglo’s promissory note.
It is hoped that Bank of Ireland which the Government partly controls through its 15% shareholding will buy the bond from NAMA, and exchange the bond with the ECB, but
(1) Bank of Ireland, which is majority controlled by the private sector including the trio of North American investors who bought into the bank last summer, hasn’t agreed to buy the bond.
(2) The ECB hasn’t seemingly agreed to lend Bank of Ireland cash if Bank of Ireland does buy the bond.
In other words, what is happening is the Government is taking €3.1bn from NAMA to pay off the €3.1bn promissory note payment that now falls due. The Government has failed to agree anything it seems with anyone. Save with NAMA which the Government controls despite all the blather about NAMA’s independence. It is unclear how NAMA can buy this bond which is a colossal undertaking for NAMA, an entity that operates under the NAMA Act and the European Commission approval of the NAMA scheme. Did the European Commission foresee NAMA lending billions to the Irish government under the scheme approved in February 2010? Absolutely not, and it is unclear how NAMA can, under the terms of the NAMA Act, buy billions of euro of bonds which may mature in 2025. This “deal” smacks of last minute panicking and it seems nothing has been agreed or conceded by the IMF, ECB or EU.
Expect more on the Promissory Note deal here later.
NAMA Wine Lake 
I admit that I find this pretty techincal, sort of , so I could be wrong in my assumption, but is there any which way this is anything other than a complete cluster f*** of a situation? In actual fact hasn’t this whole Prom Note thing just descended in to an utter farce with the Govt looking like they just got schooled?
How to burn €3.1 bn in three easy steps:
Nama (€3.1 bn) > Government > IBRC > CBI (€0)
Morgan Kelly was so right when he said in the Irish Times back in 2008 that “for all it [bailing out Anglo] will achieve, the money might as well be piled up in St Stephen’s Green and incinerated”. He was only wrong about the exact location of the bonfire – maybe the real reason Occupy Dame Street had to be moved was because their pallets would have been a fire risk.
OOOOPs
How to burn €8 bn in five easy steps:
Anglo (€8 bn) > Developers > Nama > Government > IBRC > CBI (€0)
@ Brian, your so right!
Was this what NAMA was set up for? So, despite all the lovely legalize about NAMA being independent, it is under the complete control of government, who can dip in anytime there is a cash pile left lying around. Utter farce.
Anyone who can turn the promissory note saga into a photo op is not as nauseatingly stupid as the general population appears to believe.
Noonan smiling on the front page, beside the word ‘deal’ how about that…next he’ll be telling you ‘we have turned the corner’.
NAMA providing the money to pay an IOU for Anglo….reminds me of an image from a Tom Sleigh poem of a self defeating dog digging and digging in the snow, as it continues to snow.
and the spin on this announcement…. priceless!
nice little vig.
“The margin for the Bank over ECB funding which would apply to this transaction is 135bps.”
Click to access proposed-securities-repurchase-transaction-with-ibrc.pdf
Who would have ever thought that Nama would become a PIIGS (sic) bank to be be raided by the Governement when it runs short of cash. Extraordinary mission creep.
Maybe, Nama could be pursuaded to make up the shortfall in the household charge which would only cost an extra 3% and no one would notice.
The European Central Bank shot Michael Noonan’s idea of transferring the 31st March 2012 promissory note in to a bond. The European Central Bank said that Noonan’s proposal represented a “technical default” and rejected the idea.
Surely the European Central Bank would regard today’s proposal as a technical default too?
Thanks for the explanation of the process NWL.
Was getting a little confused reading Noonan’s statement.
The ECB has issued a statement about the promissory note mechanism
http://uk.reuters.com/article/2012/03/29/ecb-ireland-idUKB5E7N501320120329
@Gerhard, thanks for that. Seems as though the ECB has conceded absolutely nothing, nada, nichevo. Ireland is repaying the promissory note but taking cash from NAMA – which may be unlawful – rather than the Troika. It is deeply disappointing that Minister Noonan failed to answer questions about his statement, and it now seems that Leinster House has gone on holidays for three weeks.
Pacta Sunt Servanda! (roll eyes).
hehehehe! Why am I not astonished? Danke Gerhard!
Doesn’t this sound all rather like how the Greeks ran things
Hang on. That’s the kind of money that the government will have to fork out every year for the next decade right?
If it’s in a panic and has to bend over backwards and play tricks with NAMA just for the first payment, is there really any hope that the second payment will even take place?
Still don’t see what’s unlawful about NAMA purchasing the bonds – it’s hardly State Aid for the State to give NAMA a bond which it pays full whack for. It’s also not in breach of any of the committments at para. 74 of the EC approval. (http://ec.europa.eu/eu_law/state_aids/comp-2009/n725-09.pdf)Therefore, if not in breach of State Aid law, I can’t see what case someone could take in Ireland on that ground.
On an administrative law argument that it’s ultra vires re: the 2009 NAMA Act, section 12 is very wide, more than wide enough to cover it. E.g. “(f) guarantee, with or without security, the indebtedness and performance of obligations of others (whether or not NAMA receives any consideration for, or direct or indirect advantage from, the giving of the guarantee),” …
“(r) borrow, lend or transfer debt securities, including, (but not limited to) equity and debt instruments,” …
“(u) invest its funds as the Board determines,” …
etc. (http://www.irishstatutebook.ie/2009/en/act/pub/0034/sec0012.html)
I would like to hear a reasoned argument for the illegality of what NAMA’s doing.
@Cathal, thanks for your comment, and taking the time to consult and reproduce extracts from the NAMA Act and EC approval. I will reply to you, but I want to see NAMA actually conclude the deal first. Presumably we might expect a press release from NAMA for such a major transaction…
on a cynical nevertheless serious note…. here are my thoughts:
Having watched the RTE show with Minister Noonan, I admit to experience a burning temptation to comment on his body language and facial expressions in great detail, but in Ireland 2012 the blasphemy law or defamation act of 2009 carrying a 25,000 Euro maximum fine stopped me in my tracks.
Would you ever have thought that PapaRatzi would convert to Islam?
Exactly, it is not going to happen as long as there are expensive enough drugs available to fight his shoulder arthrosis just enough so he can still wave his paypal Greetings…I mean papal Greetings from the balcony to the bondholders… I mean his sheep.
What the Pope and Noonan have in common you may ask? It is not the shoulder arthrosis, I can promise you that much.
The overall importance of the announcement resonates with me as strongly as the news back in 2006 when the Tennis legend Martina Navratilova actively engaged to defend the right of sheep to be gay.
Considerable amounts of taxpayers money was spent on research of gay sheep in the US at the turn of the millennium and to Martina’s dismay researchers at the Oregon State now claimed to have discovered a cure for gay sheep.
My world had changed forever.
Nel, are you sure BOI is to buy the bond? It appears from VB that some in government assume an actual straightforward purchase. That’s not how I interpreted the minister’s statement.
Well…. there goes NAMA’s staple financing!
I’m going to open a book on Intrade on when NAMA will be re-paid. It’s not the first time someone said “I only need a loan for a few weeks to tide me over until I get the money from my ……. (fill in the blank).” never to mention it again.
A blatant case of smash ‘n grab and they didn’t even wear a mask.
@WSTT due to the related party nature of the proposed transaction,the stock exchange requires a shareholder vote.Now that the Irish Govt. has a “deal” the yanks,specifically those from NY,will consider the negotiations to have only commenced.