[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.
NAMA Wine Lake 
@NWL
Someone in high places must have been reading your research on Nama vs. IBRC :-)
The liquidation of IBRC has to be good news. [David Tepper’s BOI should get our thanks on that one, for his flog the dead State strategy].
So the 28bn PN will go as follows;???
10BN State bond, held by ICB, for how long?
16BN NAMA bond, but repayable before 2020? That sounds like a lot of repayment, presumably in 2020 and not each year.
2BN Subbies and other bondies wiped completely.
Even for the last bit alone, this is good news.
I have to take back the bit about 2 bn subbies getting wiped. Reading notes from IBRC (June 30th 2012), only about ~300 million bonds, ordinary and subbies, are on the block. The remainder ~900million is government guaranteed.
Still 300million is not to be thrown away.
Expect MOF in Dail 9pm.
This is a staged pantomime. Organisations will be renamed, desks will be moved, but come March 31st the Promised Notes Will Be Paid.
No. The ELA will be paid, but the PNs will not be paid to IBRC.
Instead NAMA will issue bonds (IOU) to IBRC for ~16bn, the amount of the loans IBRC is still trying to collect. Then the State will step into the breach for the balance of ~10billion by issuing a bond, that apparently the ICB will buy with by means of a loan fro the ECB. It is still an Irish State bond, maturity unknown.
Lets hope the IBRC loans outstanding, 16bn net, have been reserved to an amount that NAMA will eventually collect.
Final IBRC board meeting took place this afternoon.Understand thag new Man in place since 6pm
Staff expecting job losses.with dual roles
Wondering how this will effect the quinn case.
@nwl
Just wondering where this will leave the Quinn saga – don’t see NAMA going to the same level as IBRC in fighting the case?
ELA will be repaid, but only with new debt from ECB. So IBRC has not had to use its Govt funds or funds borrowed from the ESM, IMF or whereever to repay the ELA.
As far as I can tell there is no net transfer of resources from the state to the ECB in March, or anytime before 2020.
The question remains: what is the seniority ranking of the new Govt bond to be issued to IBRC? Will it be pari passu with existing and future sovereign debt? Will it be issued under Irish law? Can we eventually default on this bond without jeapordising bone fide sovereign debt holders?
Also is it really right that remaining senior Anglo bond holders will be burnt? How much would this save?
So the 3 questions are:
How much does the state save on this?
How about the Quinns?
How does liquidation affect staff pensions/redundancies at IBRC?
@ John The Anglo Irish pension fund is in surplus.
ongoing litigation grandfathered in-pg 13/14
reading it now-yikes what a lot to get true review and comprehend.
@NWL
Do you think this is an agreed ‘solution’ with the ECB or is the MOF telling the ECB, this is what we are doing?
@Joseph, I think it has been agreed in principle.
The ECB is getting total security over what is the promissory note debt, it is being converted from an IOU scribbled out by Brian Lenihan on a sheet of paper along with a “comfort letter” and is being replaced with a sovereign bond which is crystal clear Ireland’s debt.
Ireland is getting the ECB to agree to NAMA to issue more bonds which only cost NAMA 0.75% per annum and which will be redeemed by 2020, and there is monetary financing of about €10bn.
I believe something like this has been agreed but requires ECB gov council and board approval. But no-one is saying very much so treat this with grain of salt.
@NWL
Where is the 10bn in monetary financing coming from – I don’t see it.
Most of the interest paid on the PNs would have flowed back to the state through via the CBI anyway, so why is important that the ECB borrowings only require .75%?
The way this is shaping up, are we not just exchanging dodgy prom notes, that are defacto junior to every other form of Govt Debt, for bone fide sovereign debt that ranks pari passu with current and future investors in Govt Bonds?
It seems to me that we are jettisoning the interests of sov bond holders for the sake of saving a bit on the real value of the PNs, which, lets face it, in the low inflation environment that we will have over the next 10 years, doesn’t amount to much.
ECB need time according to this:
http://www.independent.ie/irish-news/no-deal-tonight-ecb-wants-more-time-29053005.html
@John Foody
Does not the heart bleed for our ECB ‘partners’ as they consider this. The sheer anguish of it.
They can of course decide to implode the Irish banking system. That is, after all, what some of now departed board members threatened to do last time by stating that Irish bank collateral would be refused.
The last time we had a night meeting like this it cost us billions so much went on we didn’t even have time to take notes hope it’s not the same again
They should merge in AIB too.
@NWL
You just got a plug from Sean Whelan on the 9 o’clock news.
Any particular reason why the NAMA bonds are necessary? Presumably you could just issue the lot as straight govs?
@JB, the NAMA scheme is already up and running and approved by EC and there is a NAMA Act. So issuing new bonds to acquire the legacy IBRC loans should be straightforward. Also NAMA bonds pay very low interest of just over 0.75% currently.
I’m not keen on this ‘bailout programme full stop. My preference is to enter into a DEFAULT programme.
As I wasn’t afforded a vote on this (via referendum) in Nov 2010, surely now is the ideal time for such- given that we live in a democracy.
Great to get rid of the IBRC board which were costing us a fortune all Aussie’s who knew nothing about the Irish way of life the Staff will be needed to complete the closedown there will be some duplication better rid of a bad thing
Should have done this back in 2010 wasted a lot of money
Banana Republic???
Why is the Dail not being given opportunity to scrutinise a (very?) important piece of legislation?
Here is the link to the bill.
Click to access IBRCBill.pdf
Thanks John
Hopefully Minister Noonan will explain why such complex and unclear legislation has to be passed with such speed. If not it will further diminish the respect we have for those who govern us – sorry – not so easy to cut and paste on iPad
@Dontyaluvem all looks awfully hasty-silent on the PN’s-appears to be provided for on page 34,section 17….but!
Will await NWL’s analysis,before commenting further,and I need to re read it.
Re: The Bill
Basically, the Bill invents a new process called “Special Liquidation” just for IBRC. (Think of “examinership” for Beef companies in the 1990s)
Special Liquidation appears to be supercharged liquidation, superior to all other processes, and indeed superior to all legal proceeding (“there shall be an immediate stay on all proceedings against IBRC”). A lot of the automatic process of ordinary liquidation may or may not apply as the act dictates.
There’s stuff about the Irish Central bank and obligations being “ultra vires” or other such legalese. Search me. I assume some stroke or other is being considered.
NAMA is in there; empowered to bid or buy and get funds from the ICB, and it appears to hire people from IBRC.
The Minister for Finance is empowered to issue interest bearing securities as he “thinks fit”. “You hear the sound of distant thunder”.
Other than this, I can’t see anything about €40 billion of bonds or indeed any numerical amount of bonds at all.
There’s stuff about information disclosure _between_ IBRC, the ICB and NAMA, (etc?). I don’t think they shut you down yet NWL!
———————————
This isn’t anywhere near as polished as the PIA bill, but I doubt it’s a 24 hour rush job (unless I seriously underestimate paralegals). I don’t get the haste involved here. Did the Quinn’s take a case? Is some investor pulling out(Tepper? Gilmore?). Maybe someone pulled a wobbly in the DoF? Maybe the Fine Gaelers got some kind of gombeen second wind. The ECB’s hesitancy does not suggest haste from that quarter. There seems to be no reason for the disgraceful way this bill is being shoved through the Dail tonight.
I still think this is all a pantomime.
Noonan on now. First people looked after were the employees of the bank — handsomely looked after. A crisis this ain’t.
Note that Bill also applies only to IBRC, and no other bank. We still don’t have a bank wind up process.
The Ministers statement is now available …indeed !
“I would have preferred to be introducing this Bill in tandem with a finalised agreement with the European Central Bank. However, I understand that the European Central Bank will continue to consider the proposals made by the Irish Government tomorrow.”
http://www.finance.gov.ie/viewdoc.asp?DocID=7535
Not sure to “celebrate” that Anglo is now dead…but is this the silver bullet to kill that zombie.We await the ECB’s reaction,what now for Paddy McKillen and his epic,courageous scrap with the “twins”.
@JG, well NAMA doesn’t respect Paddy McKillen’s protestations and seems happy to deal with the Barclays whereas Mike Aynsley’s IBRC committed to support Paddy in his struggle with the Barclays.
the Australian & American contractor executives will get paid handsomely but the ordinary staff will more than lightly get statutory redundancy wrong wrong wrong
Aynsley’s personal vendetta against the Quinns is now over no more million’s being wasted thankfully
@Micko, NAMA will now pick up the baton in the Quinn case, and NAMA are harder nuts than IBRC. Don’t think there’ll be celebrations in Cavan this evening.
So will NAMA now take over the quinn cases and fight them to the same degree as Anglo.
Will be interesting to see
There will be trouble in Dublin on Saturday. Maybe the protest march should be called off. Or is this all carefully choreographed ?
there will be no trouble in Dublin on Saturday, Camella
The government just had to put up with a barrage of top shelf speeches from the opposition finance spokesmen. Even Boyd-Barrett landed a good shot or two. The last to speak was Stephen Donnelly, with the finest speech of all.
Kenny is speaking now, and looks pretty weary. I think the government TDs — many of whom are lush — are now beginning to grasp how serious this has become.
Political pantomimes are all great fun it seems, until the morning after. It’s 1:05 am. I should go to bed.
Gilmore just came on. 1:13. This was all a political stunt to shore up Labour. Not sure if it will work after all the drama.
[…] https://namawinelake.wordpress.com/2013/02/06/nama-to-merge-with-ibrc-as-scramble-for-promissory-note… […]
8:30 GMT; not a word on FAZ, Handelsblatt, Spiegel.
@Dorothy, the Germans should be happy enough with this. They will see promissory notes which have always been wacky and risky – risk being that Ireland would say they weren’t sovereign debt so “feck off” – converted to sovereign bonds. We are happy because we are allowed use the un-used allocation of NAMA bonds – remember the NAMA scheme allows up to €54bn to be issued and we have only issued €32bn and indeed redeemed €5bn of these. The ECB and EU wanted NAMA bonds restricted and 25% redeemed by the end of this year, so that will now need be changed and there will be a risk to the ECB and EU that NAMA will make a loss between now and 2020, but that risk is offset by the closure of risk to the €26bn of outstanding promissory notes.
All good @nwl; maybe some good press from the EZB today?
Quote from Noonan’s speech:
Eligible depositors, bondholders and counterparties will be repaid under the Deposit Guarantee Scheme and Eligible Liabilities Guarantee Scheme. There is also a Derivatives Guarantee in place.
End Quote
On ELGS see here:
http://www.ntma.ie/business-areas/funding-and-debt-management/eligible-liabilities-guarantee-scheme/
http://www.finance.gov.ie/viewdoc.asp?docid=6474
It will be interesting to see how any new interest will stack up against the previous 0.075% payable on ELA ‘Promissory’ funding.
There was no other figure payable externally.
Anglo (3.05%) and the CBoI (2%) were raising defacto capital by adding additional % to the Taxpayer.
Taxpayer rate 5.8% of which only .075 was going to the ECB.
In the above equation, for Anglo read Exchequer, for CBoI read Exchequer.
p.s. I wonder how many large corporate deposit A/C are disappearing out of AIB as we speak.
putting figures on the interest paid on the 3.1B Pee note
.75% 23.25M (ECB)
2% 62M (CBoI)
3.05% 94.55M (Anglo)
Enda somehow got to a cost of 8% interest on the Pee notes… the ‘new’ arrangement is to be 3% (Dail statement).
Well he is 7.25% off on the 8% statement.
Who’s making the 3%?
3% of 31B is .93B or almost 1b/annum, granted it will take us a few years to get to 31B (or is it going on the book right away???) and the capital will start to take a hot in year 30/35.
Yes, cash flow today and tomorrow is improved but at a cost of at least adding 15B down the line (as the 3Joes said “we can’t see the road there are so many cans on it”).
@JR he’s technicall correct,yep factoring in the interest free period the effective interest rate on the PN’s equates to approx. 8%,there was no interest last year.
Anglo’s annual report was eagerly awaited as some people maintained that they were counting on the “spread” or positive arbitrage to run off their book.
@JR the interest rate/rates on the PN notes was that prevailing in the market for similar vintage Irish gilts/bonds factor in the Byzantine structure and you get close to 8% effective interest rate.Many eminent and vocal “experts” have long held the view that the interest rate is irrelevant as its a pass tru…interesting that such a big deal in now being made over the rate.
The Minister outlined the PN scheduled pmts in a Dail question.
Mbl can’t link it now,the ELA has been ‘estimated’ at 0.75% never confirmed nor denied.
As explained on RTE, the CBI receives 3% pa from bonds and pays 0.75% to ECB. Difference of 2.25% flows back to Exchequer for so long that CBI holds the bonds.
@Brian have not had chance to review the PN ‘deal’ but following your the above ,they are tearing up the PN’s which pay close 8% and self amortize over a relatively short time frame with a funky lower yield longer maturity govt. bond…how do you spell monetary financing again !
@JG, this afternoon’s choreography involved ECB president Mario Draghi refusing to answer details on the proposed scheme in his monthly press coneference which was held in Frankfurt between 1.30-2.30pm and An Taoiseach Enda Kenny was originally scheduled to address the Dail from 2.30pm onwards. Skeptics might suggest that Mario did not want to field questions on the subject today, and from all four corners of Europe, there will be governments making a bee-line to the ECB, asking if they can issue bonds to their banks which can be used for funding from the ECB, because after all, “similar cases will be treated equally”
Can’t blaim him,poor chap must not have approved this ‘deal’.
In summary weak/dodgy paper is getting exchanged for sovereign bonds with more attractive terms,but seniority,at best a push.
But ‘shurly’ by extending the time frame this ELA is ‘out’ tis a form of monetary financing. ?
I’m waiting to see some NPV calculations and cashflow projections but sense that the deal is realistically the best that might have been secured. Sure, not as good as zero-rate bonds or complete write off which I really wanted – see http://www.planware.org/briansblog/
Now, we need to start sorting out the household and corporate debt; get the banks sorted and lending; push for CPA Mk2; and tackle other issues raised in Trioka reports.
@JG Conal macCoille wrote an exceptionally good explanation of the ‘ins and outs’ of Pee interest in last Sundays SBP – behind paywall.
@JR undoubtably it’s a great paper have online sub but rarely get to it.
Not having a “go” at you at all,just hoping to clarify some common misconceptions.
Had do lots reading myself on these.
Basically that ugly red headed stepchild Anglo since put down,was unable to access any “window” for funding.
Hence,the ELA and PN’s..the Irish central bank took crap collateral and increased the money supply.
constructive “go’s” always welcomed John.
@JR I got it wrong !
ELA is 2.5%
ELG is the one at 0.75 %
Apologies.
In step 3 above, should it be ICB instead of ECB…..cannot understand the link between ICB and ECB.