Debt agency to seek to raise 'billions' privately this year

Sat, Jan 14, 2012, 00:00

THE GOVERNMENT’S debt management agency plans to try to begin borrowing from private investors in the middle of 2012.

The head of the National Treasury Management Agency, John Corrigan, said yesterday the objective in 2012 would be to raise “billions rather than millions”.

The agency ceased issuing government bonds in late 2010, shortly before Ireland was bailed out by the EU and International Monetary Fund. The agency intends to test the market by offering short-term debt instruments known as treasury bills for sale.

If sales of treasury bills are successful, the agency will auction longer-dated government bonds as it weans itself off EU-IMF funding.

Mr Corrigan said there were considerable uncertainties due to the euro area financial/sovereign debt crisis. Efforts to borrow fresh private money would have to be “opportunistic”.

He said discussions with the parties to Ireland’s bailout on restructuring more than €30 billion in promissory notes used to rescue failed Irish banks were “ongoing”.

It is a central Government objective to lessen the burden of these bank bailout costs, not least so that total public debt can be made more manageable. This, in turn, would make borrowing easier and cheaper for the Government.

Mr Corrigan was speaking during a briefing on the agency’s activities in 2012, along with those of the many agencies within its remit, including the National Asset Management Agency and the National Pension Reserve Fund. He said his organisation had met more than 300 institutional investors across the world in 2011 and that further meetings in Europe, North America and Asia were planned in 2012.

“In our dealings with investors, we have noted that Ireland is gaining credit for the progress it is making,” he said.

According to the agency, total interest payments on the State’s debts amounted to €5.4 billion in 2011, a figure that has multiplied in recent years as public indebtedness has ballooned.

In 2007, gross public debt stood at just 25 per cent of gross domestic product (GDP). Last year, according to Department of Finance figures cited by the agency yesterday, the amount was more than four times larger, at 107 per cent of GDP.

According to yesterday’s briefing, Nama approved sales of €6.6 billion of property assets it had acquired from State-guaranteed banks. The report said Nama was on course to meet its target of repaying one-quarter of its debts by 2013.

The National Pension Reserve Fund made a return of 1.6 per cent on the funds it invests, excluding its investments in the rescued banks. The agency said this compared with an average loss of 3.5 per cent among Irish-managed pension funds. Pension funds tend to hold a large proportion of their investments in company shares. Share prices in most global markets performed poorly in 2011, which the agency said contributed to low returns in 2011.