Promissory Notes deal with ECB will require "special financial legislation"

Bullrush

http://www.businesspost.ie/#!story/Comment/Cliff+Taylor/Special+laws+may+be+needed+for+prom+note+deal/id/19410615-5218-5112-7d96-b77820462440

So this looks good, right? Article says "the promissory note ... would be replaced with a long-term government bond".

Chips Lovell

There's been rumours going round that a deal is imminent alright. I guess we'll have to wait to see what the terms are and what difference it will make to the annual budget.

Kristopherus

And I thought they were going to legislate that the promissory notes are illegal:rolleyes::rolleyes::rolleyes:

View

Bullrush wrote: »

http://www.businesspost.ie/#!story/Comment/Cliff+Taylor/Special+laws+may+be+needed+for+prom+note+deal/id/19410615-5218-5112-7d96-b77820462440

So this looks good, right? Article says "the promissory note ... would be replaced with a long-term government bond".

So, basically - previously - instead of adding 30 billion to the national debt to shove into Anglo we "magicked" it out of thin air via the promissory notes.

In the immediate future, we'll effectively reverse the promissory note "cunning plan" and add the monies owed to the national debt instead.

Clever, right? Lots of savings for the tax-payer, right?

Chips Lovell

The goal of a deal is not to make it go away (which is pretty much impossible at this stage), but to spread out the repayment over a longer period.

Bullrush

View wrote: »

Clever, right? Lots of savings for the tax-payer, right?

I suppose I'm of the mind that we're unlikely to get a good deal and we need to get the least worst deal at this stage. Hopefully we can welch on our debts at a later stage!

keno-daytrader

- Follow up: Ireland Fin Min Noonan said to plan a speech on Anglo Irish promissory notes tonight; govt plan would liquidate Anglo Irish as part of bank debt solution. - Source TradeTheNews.com

Scofflaw

keno-daytrader wrote: »

- Follow up: Ireland Fin Min Noonan said to plan a speech on Anglo Irish promissory notes tonight; govt plan would liquidate Anglo Irish as part of bank debt solution. - Source TradeTheNews.com

Actually liquidate it now, rather than continue running it down over the next x years? Interesting possibility.

15 year bond being considered, apparently.

cordially,
Scofflaw

Chips Lovell

That's a bit less than the 30 or so originally being bandied about. Current arrangement is 10 years, isn't it?

Scofflaw

Vladimir Kurtains wrote: »

That's a bit less than the 30 or so originally being bandied about. Current arrangement is 10 years, isn't it?

Yes - some of this may yet be optics, I'm afraid, in that something that will almost certainly disappear is the interest on the promissory notes. If that turns out to be the case, I expect the opposition shortly to discover something they have ignored to date, which is the circular flow of that interest.

cynically,
Scofflaw

samsamson

Would an extra 5 years really make that big of a difference?

Scofflaw

samsamson wrote: »

Would an extra 5 years really make that big of a difference?

Assuming that is the actual figure, it should reduce the net present value of repayments by a chunk. Not unlike having your mortgage term extended from 30 to 45 years - and in the case of a state, the further you push repayments out, the very much the better.

cordially,
Scofflaw

Scofflaw

Various numbers being bandied about - it may be 40 years rather than 15. Ah well, I suppose we can wait until this evening to find out, it's not as if any of us can spend the money between now and then...

cordially,
Scofflaw

samsamson

I have a limited understanding of the whole topic but would certainly be hoping for the longest term deal possible, simply to reduce the annual strain and make it more manageable (assuming we have to pay it all back at some point of course)

antoobrien

View wrote: »

So, basically - previously - instead of adding 30 billion to the national debt to shove into Anglo we "magicked" it out of thin air via the promissory notes.

In the immediate future, we'll effectively reverse the promissory note "cunning plan" and add the monies owed to the national debt instead.

Clever, right? Lots of savings for the tax-payer, right?

Nope because it's already on the national debt and has been since 2010 (and has been accounted for as such in the national accounts submitted to Eurostat).

Confused yet? Yes - good, it gets worse.

We haven't actually borrowed the money to pay the PNs, but it's still on the debt because we have promised to pay it.

So instead of following the plan of "paying" Anglo (to pay the central bank, which will return the interest on the original loans made to anglo as profit to the exchequer) €3.1bn for 10 years, then lower amounts for another 5/10 we'll issue a bond (or a series of bonds) to replace it.

Will it be cheaper? Depends on the interest rate agreed. My guess is probably not (for the same reasons we had to create the PNs in the first place - EU competition law).

I wonder part of it will be the amortizing bonds they announced last year.

antoobrien

Scofflaw wrote: »

Actually liquidate it now, rather than continue running it down over the next x years? Interesting possibility.

It may be that in order to issue a bond that IBRC can use, it needs to be "resurrected" and get a license back for the period of the bond.

It is understood that as part of this, a restructuring of the Irish Bank Resolution Corporation (formerly Anglo Irish Bank) would be needed and that would require special legislation to go through the Oireachtas.

This is necessary so that the toxic institution that is being wound down would return to being a functional bank with a licence, allowing for the issuance of a long-term bond.

http://www.breakingnews.ie/ireland/seanad-on-standby-amid-anglo-irish-bank-speculation-583859.html

Chips Lovell

David Murphy on RTE now saying there'll be a number of bonds with an average term of 27 years.

Scofflaw

We're evidently in entirely speculative territory at the moment, given the last two tidbits! Anglo to be resurrected as a working bank, Anglo to be liquidated.

cordially,
Scofflaw

rubberdiddies

ok so I have limited detailed knowledge of all things promissory note related, but here's how this potential deal seems to me......

right now we have this 'debt' as promissory notes, which are basically IOUs for which there arent 'really' any legal repercussions if we decided not to pay back.

it looks like we are going to be turning these IOUs into sovereign debt, which we WILL be required to pay back.

seems like the ECB are going to get an incredible deal out of this.
their concern currently is that we wont pay back the IOUs, and sure what can they do about it if we dont? Our leaders dont have the balls to test this theory.

Sand

rubberdiddies wrote: »

ok so I have limited detailed knowledge of all things promissory note related, but here's how this potential deal seems to me......

right now we have this 'debt' as promissory notes, which are basically IOUs for which there arent 'really' any legal repercussions if we decided not to pay back.

it looks like we are going to be turning these IOUs into sovereign debt, which we WILL be required to pay back.

seems like the ECB are going to get an incredible deal out of this.
their concern currently is that we wont pay back the IOUs, and sure what can they do about it if we dont? Our leaders dont have the balls to test this theory.

Yep - this is the worst case scenario. The government is so desperate to announce any deal that it accepts an even worse deal than the promissory notes. You have to remember that when the promissory notes were first introduced, Lennihan (still the worst MoF the state has ever had) dismissed them as a mere accounting trick - not real debt.

It appears the morons at the DoF are now on course to convert them into real debt, without any write-down or debt forgiveness. This will be announced as an amazing triumph. I'm not sure future governments will agree.

- One quite worrying aspect about this is the mad last minute scramble that appears to be going on to try and rush this deal through overnight via the Cabinet and the Dail. Has absolutely *nothing* been learnt from September 2008? I don't trust this government to know what they're doing, and I really don't like that they're trying to rush through something like this with a rubberstamp review.

AlmightyCushion

rubberdiddies wrote: »

ok so I have limited detailed knowledge of all things promissory note related, but here's how this potential deal seems to me......

right now we have this 'debt' as promissory notes, which are basically IOUs for which there arent 'really' any legal repercussions if we decided not to pay back.

it looks like we are going to be turning these IOUs into sovereign debt, which we WILL be required to pay back.

seems like the ECB are going to get an incredible deal out of this.
their concern currently is that we wont pay back the IOUs, and sure what can they do about it if we dont? Our leaders dont have the balls to test this theory.

We can always default on government bonds, it's not a good idea because it makes it difficult to get people to lend to you and if they do they'll want a shedload of interest to take the risk. I don't think we can default on the promissory note because it's not owed to a normal investor like a company or pension fund who can be burned, but is instead owed to the Irish Central Bank. I imagine defaulting on ICB debt is not possible.

AlmightyCushion

Sand wrote: »

Yep - this is the worst case scenario. The government is so desperate to announce any deal that it accepts an even worse deal than the promissory notes. You have to remember that when the promissory notes were first introduced, Lennihan (still the worst MoF the state has ever had) dismissed them as a mere accounting trick - not real debt.

It appears the morons at the DoF are now on course to convert them into real debt, without any write-down or debt forgiveness. This will be announced as an amazing triumph. I'm not sure future governments will agree.

- One quite worrying aspect about this is the mad last minute scramble that appears to be going on to try and rush this deal through overnight via the Cabinet and the Dail. Has absolutely *nothing* been learnt from September 2008?

Well it isn't real debt because we haven't borrowed it yet. The promissory note is on our government debt but we have yet to borrow it. E.g. in March (let's pretend this new deal doesn't go through) if the government were to borrow €3bn to pay the promissory note, our government debt wouldn't increase. If the state magically had the money and we were able to pay it out of state funds then our government debt would drop by €3bn.

Basically, we are going to have to borrow this money any way, this just means we'll have longer to pay it back and hopefully at a much lower interest rate.

Sand

AlmightyCushion wrote: »

Well it isn't real debt because we haven't borrowed it yet. The promissory note is on our government debt but we have yet to borrow it.

Yep, I fully appreciate Lenihans logic - I just don't agree with it. But I was highlighting that Lenihan clearly didnt fully appreciate that the ECB was entirely serious about wanting every single penny back. We are not imagining the 3.1 billion being sucked out of the real economy every year to pay for it. That Lenihan considered it only an accounting trick showed the level of incompetence of both himself and the DoF.

samsamson

RTE reporting that IBRC is "liquidated as of now", final decision on plan may not come within next 24 hours.

http://www.rte.ie/news/2013/0206/366534-updates-promissory-note-anglo/

emo72

I'm not full of confidence. I can't believe this is getting rushed through. I fear tomorrow will be a hard day for government spinmeisters

Sponge Bob

The Dáil and seanad meet at 10:30 tonight to enact liquidation legislation. Alan Dukes has his P45 then and KPMG take over as liquidator. Dukes has confirmed to the media that he is gone. Enda can appoint him to Martin McAleeses seat in the Seanad and to a full Ministry OTHER than finance by breakfast, what!!!

Appointing a liquidator removes any obligation to pay INTEREST on promssory notes it seems and some flummery will see the promissory notes appear in teh Central Bank under a different name.

drkpower

Can anyone explain the apparent extreme urgency at play? Why can the matter not be debated tomorrow/Friday and voted upon early next week?

Atlantic Dawn

Todays liquidation decision is solely because David Hall took legal action on the promissory notes and all it was going to take was a TD to bring down their whole house of cards with bringing a similar action, it's a disgrace, a bloody disgrace.

Scortho

Could the urgency possibly be due to the David Hall case?

Also by extending out the bonds, does inflation not reduce their value over the long run, as in a 10 Bn bond today isnt worth 10 bn in 40 years time as inflation will have devalued it? Or am i misreading that?

MadsL

Scortho wrote: »

Could the urgency possibly be due to the David Hall case?

Also by extending out the bonds, does inflation not reduce their value over the long run, as in a 10 Bn bond today isnt worth 10 bn in 40 years time as inflation will have devalued it? Or am i misreading that?

Developer's wife tries to shift an eight carat diamond ring before the courts get it, and the Government try to move any remaining Anglo assets into private hands before the shoe drops.

Business as usual in the Banana Republic. :rolleyes:

kippy

drkpower wrote: »

Can anyone explain the apparent extreme urgency at play? Why can the matter not be debated tomorrow/Friday and voted upon early next week?

I'm not getting the requirement for urgency either.
As Noonan said himself a few days ago, we've still almost two months to go till the end of March giving us ample time to look at this.
Unless we are being put under pressure to accept in a short timeframe. (I know if a salesperson puts me under pressure to accept something I am more likely to step away and look at it a bit more)

Ultimately what we are looking at doing here is pushing the majority of the payments onto the next generation(s).

Chips Lovell

A prom note deal has been on the agenda long before Hall took his case.

GCU Flexible Demeanour

Scortho wrote: »

Also by extending out the bonds, does inflation not reduce their value over the long run, as in a 10 Bn bond today isnt worth 10 bn in 40 years time as inflation will have devalued it? Or am i misreading that?

Yup, that's the kind of thing in play. The other factor is the interest rate, because we'd be paying that interest for longer. So a delay has value; the question is really what the overall package amounts to.

That said, I think we do have to recall that many would feel the amount of Anglo debt that should fall to the taxpayer is zero.

I'd also be a bit bothered about the debts going into NAMA. I'd prefer, at this stage, if the debts were put under the management of the Russian Mafia, in exchange for a performance related bonus.

GCU Flexible Demeanour

Vladimir Kurtains wrote: »

A prom note deal has been on the agenda long before Hall took his case.

Grand, but I think people are trying to account for the urgency. Why the need to pull an all-nighter now?

kippy

Anyone know why there is an urgency with this?

drkpower

Scortho wrote: »

Could the urgency possibly be due to the David Hall case?

Doesnt explain the overnight debate and vote, and the president returning immediately and cutting short an official foreign visit. Any prom note case will not be heard for at least a number of weeks.

Im not one for conspiracy theories, but this doesn't feel right. At all.

Chips Lovell

GCU Flexible Demeanour wrote: »

Grand, but I think people are trying to account for the urgency. Why the need to pull an all-nighter now?

TV3 news saying the government believed that once news of its intention to liquidate IBRC came out it needed to act fast. Not sure of the reasons behind that yet.

cassette50

drkpower wrote: »

Doesnt explain the overnight debate and vote, and the president returning immediately and cutting short an official foreign visit. Any prom note case will not be heard for at least a number of weeks.

Im not one for conspiracy theories, but this doesn't feel right. At all.

I think the Hall case is due before the Supreme Court tomorrow- Case 14.

http://www.courts.ie/legaldiary.nsf/a0b54bb3745b386280256c4b0024092b/44501668c43608fe80257b0a004c1aa4?OpenDocument

drkpower

cassette50 wrote: »

I think the Hall case is due before the Supreme Court tomorrow- Case 14.

http://www.courts.ie/legaldiary.nsf/a0b54bb3745b386280256c4b0024092b/44501668c43608fe80257b0a004c1aa4?OpenDocument

Didnt realise that. Is it likely to be heard in full tomorrow and judgment delivered? Possible, I suppose.

Apparently some FG rep has suggested that once the decision to liquidate IRBC became public knowledge, the Gov had to act urgently to prevent a run on the banks? Does that make sense? What bank would the news cause a run on?

Scortho

MadsL wrote: »

Developer's wife tries to shift an eight carat diamond ring before the courts get it, and the Government try to move any remaining Anglo assets into private hands before the shoe drops.

Business as usual in the Banana Republic. :rolleyes:

I'm confused as to what this had to do with my post?

Sponge Bob

Namawinelake ( bless him) has a piece. NAMA will take over the remaining ( non development loan) €20bn of loans that IBRC services along with the IBRC staff.

http://namawinelake.wordpress.com/

Updates expected regularly on Namawinelake. Noonan to speak first I understand and that could start sooner than 10:30 .

Watch it here

http://www.oireachtas.ie/viewdoc.asp?fn=/documents/livewebcast/DVR-Flash-Dail.htm

Scortho

drkpower wrote: »

Didnt realise that. Is it likely to be heard in full tomorrow and judgment delivered? Possible, I suppose.

Apparently some FG rep has suggested that once the decision to liquidate IRBC became public knowledge, the Gov had to act urgently to prevent a run on the banks? Does that make sense? What bank would the news cause a run on?

I'd thought it'd be positive news?
Finally were beginning to lower the coffin into the ground.
I know I'm happy to see ibrc liquidated. And it wouldn't cause me to rush down to aib in the morning.
Although would some people be worried that the country is insolvent. But that's been the case for 4 years

michael999999

Where the hell are our public broascaster tonight?

Once again on what could be another monumental night in Irelands history, RTE can't even be bothered to bring us live coverage from the Dail!

The director should be sacked!

Scortho

michael999999 wrote: »

Where the hell are our public broascaster tonight?

Once again on what could be another monumental night in Irelands history, RTE can't even be bothered to bring us live coverage from the Dail!

The director should be sacked!

Wining and dining in your tv license!:D

Chips Lovell

Browne is covering it. Ursula Halligan was just on saying the liquidation plan has been in place for months.

Sponge Bob

Speech starting

http://www.oireachtas.ie/viewdoc.asp?fn=/documents/livewebcast/DVR-Flash-Dail.htm

Dáil suspended till 11pm is all, Vincent Browne must have asked for them, to synchronise with him.

Cian92

Speech delayed until 11pm.

Chips Lovell

Apparently Noonan's speech has been postponed till 11pm.

nc6000

Delayed till 23.00

hmmm

I really don't understand what the rush is. Huge decisions should not be subject to emergency legislation unless absolutely necessary.

MadsL

Scortho wrote: »

I'm confused as to what this had to do with my post?

David Hall reference. Don't get paranoid.