Honohan to seek debt delay

 

The Governor of the Central Bank Patrick Honohan will probably ask the European Central Bank Governing Council tomorrow for permission to delay a cash payment on the Anglo Irish promissory note due at the end of this month, according to the Bloomberg news agency.

Mr Honohan will ask for the delay to ease the debt burden on the State.

The State is due to make a €3.1 billion payment to the former Anglo Irish Bank, which is then supposed to use the funds to reduce its emergency borrowings from the Central Bank.

The reports indicate that now the former bank may use the funds to buy a new Irish government bond, meaning no net cash outflow from the State. The bond can be used to tap funding from the ECB, sources told the news agency.

The bond can then be used to tap funding from the ECB.

The Minister for Finance Michael Noonan confirmed in the Dáil this evening that negotiations were taking place with the ECB about settling the promissory note by delivery of an Irish government bond.

The concession may facilitate a longer-term effort to cut the cost of Ireland's banking rescue, which helped tip the nation into an international bailout in 2010.

The Government is seeking European help to restructure about €30 billion of so-called promissory notes used to rescue the former Anglo Irish.

"It makes sense for European officials to facilitate a restructuring, thus improving the chances of a return to the market for Ireland," said Juliet Tennent and Dermot O'Leary, economists at Goodbody Stockbrokers in Dublin, in a note.

Neil Whoriskey, a spokesman for the Central Bank, and Wiktor Krzyzanowski, a spokesman for the ECB, declined to comment.


Bloomberg