As the Ballyhea protestors make their long journey back to the Shire from Frankfurt today, ahead of an appearance by one of the protest leaders, Diarmuid O’Flynn on tonight’s Vincent Browne show at 11pm on TV3, in the Dail this morning, the Minister for Finance was providing a sense of the remaining scale of the bondholder bailout. Sinn Fein’s finance spokesperson Pearse Doherty asked the Minister about his intentions towards the two senior unsecured unguaranteed bonds that are scheduled to be paid by what was Michael Fingleton’s Irish Nationwide Building Society (INBS) on 26th June 2012. The two bonds – XS0306307694 and XS0306306613 – have €634m (one of the bonds is in sterling and has GBP 28.8m outstanding so this total € figure may change as exchange rates change) outstanding and the Minister said
“As the Deputy is aware the Government is committed to delivering a return to a successful vibrant economy. In this context I have indicated that there is no private sector involvement for senior bank paper or Irish Sovereign debt without the agreement of our external partners. This commitment has been agreed with out external partners and is now the basis on whichIreland’s future financing strategy is built. This strategy is working well as evidenced by the reduction in pricing of Irish Sovereign debt in the secondary markets and the recent successful bond exchange offer by the NTMA.
IBRC has confirmed that two unguaranteed senior bonds with a combined principal value of €0.6bn are scheduled to mature on 26 June 2012. IBRC’s position on its publicly traded securities remains unchanged. The Bank is contractually obliged to repay senior securities on their maturity dates.”
An altogether weak response which invokes sovereign debt, “agreement” with our external partners and the claim of a reduction in the pricing of sovereign debt – current 10-year yield is 7.4%, same as it was at the end of January 2012 and pretty much the same as the 7.5% in September/October 2011. Of course 7.4% for long term borrowing is not sustainable, but then again you would hardly characterize the arrangement imposed on this State by the ECB as an “agreement”. Though in the sense that this Government accepts the arrangement, it is an “agreement”
The two bonds payable on 26th June 2012 are the last of the very big bonds at the two bust banks, Anglo and INBS which of course have been merged together to form the new bank, the IBRC – thus far, Anglo has received a €29.3bn bailout and INBS has received €5.4bn. There are still billions repayable at AIB which we 99% own and which has had a €20bn bailout.The response above just highlights the impotence of this Government.
Minister Noonan was also asked for the identities of the bondholders and his response was
“As already indicated it is not possible to identify bond holders with any degree of certainty. Such securities are freely tradable once issued and therefore the issuer (i.e. the Bank) has no means of establishing the underlying ownership. These securities are publicly traded and dealt through market participants and settled by clearing house systems. An issuer does not have any access to the records of the clearing house. At maturity, the Bank will instruct its paying agent to transfer the funds due to the clearing house who will then distribute the funds to the holders of the securities as per their records.”
So on 26th June, 2012 a bank which is bust to the tune of €5.4bn so far, and which is 100% owned by this State and managed ultimately by the Minister for Finance, will pay €635m to bondholders (investors) whose identities we don’t know, investors who will receive 100% of their investment with interest. Ireland is in an IMF bailout programme, is running a 9% deficit and our debt:GDP will be 120% next year. If you haven’t heard a good Irish joke in a while, this must make up for it.
“Tonight with Vincent Browne” is on TV3 tonight at 11pm.