[The IBRC Bill 2013 is IBRC Bill 2013.pdf FINAL]
There have been rumours all afternoon of a major new development with the Anglo promissory notes and an hour ago, RTE broke the news that emergency legislation is planned which will liquidate IBRC imminently.
RTE reports “Under the plan, IBRC’s assets would be transferred to the National Assets Management Agency.”
This is what is believed will happen, but at time of writing, no-one is offering comment, save to confirm that TDs will be staying late tonight.
IBRC’s legacy loanbook of about €16bn will be acquired by NAMA using its un-used bond allocation as provided for in the NAMA Act – remember the European Commission approved NAMA to issue €54bn of bonds and to date, it has just issued €32bn (and indeed redeemed €5bn of those).
IBRC staff will be transferred to NAMA with NAMA doing to IBRC what Anglo did to Irish Nationwide two years ago, and you can expect NAMA staff to prevail.
The Government will issue a new sovereign bond, which may only be around €10bn to a new IBRC. Where did the other €16bn go? NAMA will buy the IBRC loans for €16bn and will pay off its bonds by 2020.
This is all highly fluid and updates will be posted as information is received.
UPDATE (1): 6th February, 2013. There is no official comment on what is proposed. I understand TDs are staying late and an announcement from Minister Noonan is expected. But what I am hearing is similar to a scheme that was proposed in confidence to certain parties last October 2012, and I reproduce it here. There’s a simplified balance sheet schematic at the bottom.
1. NAMA acquires the remaining c€20bn of loans in IBRC. Although these are not all development loans, under the NAMA Act, NAMA can pick and choose what loans it acquires and it can acquire non-development loans if it deems them in any way systemic, this was the argument used by NAMA at the Paddy McKillen court case. And overall the €20bn remaining loans in IBRC are “systemic” to the State.
NAMA issues new NAMA bonds for the loans. The NAMA Act and NAMA scheme approved by the EC allows NAMA to issue up to €59bn of bonds – €54bn for original loan acquisitions and up to €5bn for development funding. NAMA has in fact just issued €32bn and redeemed €2bn. So NAMA has spare of up to €29bn, and could therefore easily afford the €20bn of loans at IBRC. The ECB wouldn’t like it, but we have a NAMA Act approved by the EC so we can technically stick two fingers up to the ECB.
2. The IBRC operation is run down in 6 months because once it has transferred its €20bn of loans to NAMA, there is no IBRC business – staff are transferred to NAMA and there will be efficiency savings by removing duplication, and removing competition for resources and customers. IBRC would remain open as a business only to hold NAMA bonds which mature in 2020 and also to hold the infernal promissory notes and on the other side of the balance sheet would owe the Central Bank Exceptional Liquidity Assistance (ELA). Of course, here is clever part. IBRC exchanges the NAMA bonds with the ECB and as government guaranteed collateral they attract the lowest ECB haircut and the lowest interest rate, currently 0.75%.
3. With the cheap cash which IBRC gets from the ECB, it pay down the ELA owed to the Central Bank of Ireland. It is the Central Bank of Ireland which needed the promissory notes to have such a high rate of interest, about 8%, to approve the promissory notes as collateral to advance ELA.
4.Less ELA means the promissory notes do not need the same high interest rate. The State switches the promissory notes at IBRC with new promissory notes with a lower rate of interest. [Seems like instead of promissory note, there will be a government bond]
UPDATE (2): 6th February 2013. Am hearing that the Minister for Finance, Michael Noonan will make a statement to the Dail at 9pm. No comment from NAMA on this evenings reports. IBRC staff are alarmed at news, both of the liquidation and the take-over by NAMA. 250-odd of the 1,000 IBRC staff already work for NAMA on the smaller NAMA loans.