Noonan unhappy at bond payout

 

Minister for Finance Michael Noonan has said he is “not too pleased” about the repayment today of a $1 billion (€715 million) bond to senior unsecured and unguaranteed bondholders at Anglo Irish Bank.

Anglo and Irish Nationwide Building Society, which are now known as Irish Bank Resolution Corporation (IBRC), are getting €34.7 billion in State capital to cover losses.

Despite widespread calls to stop the payment, IBRC’s chairman Alan Dukes confirmed today it would go ahead.

Mr Noonan said today the bank had been a speculative bank in the property market, where the State had no involvement and where the Irish taxpayer had no involvement.

He said the arrangements made by the previous Fianna Fáil government to secure Anglo “were a disaster”.

Not only had a guarantee been given for the unguaranteed bonds, but the State had nationalised the bank.

“By nationalising the bank they took it over lock, stock and barrel – liabilities as well as assets,” he said.

The only way of the deal the incoming Government was in consultation and with the agreement of the European Central Bank, Mr Noonan said.

“We just couldn’t get their agreement. But I’m not happy about it. This isn’t a great day where we are paying back bonds where the taxpayer had no liability whatsoever.”

Taoiseach Enda Kenny told the Dáil today that he would love to stand up and say it was not necessary to pay the money.

But the Government had made a case to the European Central Bank (ECB) and it was not possible to get its consent not to pay, he said.

Replying to Fianna Fáil leader Micheál Martin he said: “I admit it has not been possible for this Government to unravel the agreement made by your government.”

Earlier this week, Fianna Fáil called on Mr Kenny to contact the new ECB president Mario Draghi in a “last-ditch” effort to stop the full repayment.

Speaking on RTÉ’s Morning Ireland today, Mr Noonan said the ECB and the European authorities had agreed to work with the Government “on a common paper” to see if there was a better way of financing the promissory note.

“We have seen already that working in cooperation with the European Central Bank and the European authorities is a much better way to go forward. For example, the reduction in interest rates that the Taoiseach negotiated in mid- July, the central bank were very supportive in that for Ireland.”

He said the promissory note through which the previous government had funded Anglo was “a very peculiar bit of financial engineering and it’s going to cost the Irish taxpayer overall about €47 billion between payback of capital and interest rate payments”.

Mr Noonan said there was not yet any policy commitment from the European authorities, but that the Government had their cooperation.

“It’s intricate and they are working with us to see if we can put an alternative together which would be of great benefit to us.”

The Minister said that if the Government could get, for example, a 30-year loan from Europe at the interest rates currently applying to Ireland, it would take “about €10 billion” off the Anglo debt.

“We will keep at it now..the negotiation is not complete. This is ongoing.”

Writing in today’s Irish Times, Mr Kenny said as part of the existing bailout deal was not to allow any Irish bank, including Anglo Irish Bank, default on its debts to bondholders.

He said he shared the Irish public’s dismay at the cost and unfairness of this policy

Of Anglo’s €97 billion in liabilities in September 2008 when the previous government offered it a blanket guarantee, Mr Kenny said, €3.3 billion in unsecured private debts remained, including the €700 million due for repayment today.