Deal sought to refinance €15bn of our IMF loans

Michael Noonan

The Government will look to secure agreement over the next few months to refinance €15bn of IMF loans, according to Finance Minister Michael Noonan.

There is a total of €22bn of IMF loans. According to Mr Noonan, speaking at the launch of the NTMA 2013 annual report, about €18bn of this has an interest rate of just under 5%.

Yields on Irish sovereign debt have dropped to record lows over the past few months, which means that if the Government was able to refinance the IMF loans through borrowing at current rates, then it could create an opportunity to make the overall debt more sustainable, said the minister.

Mr Noonan estimated that there could be a difference of up to 2% in the interest rate between IMF loans and current borrowings. This would translate into savings of €20m-€25m for every €1bn of IMF loans.

“I have had a short conversation with [IMF managing director] Christine [Lagarde]. She has indicated that she will not inhibit us.”

The Government would seek to refinance a total of €15bn of IMF loans. “It is important to keep a residue,” explained the minister as the IMF is part of the troika that is responsible for post-bailout surveillance of the economy.

However, the IMF loans are ‘pari passu’ with the other EU bailout loans and the bilateral loans received from the UK, Sweden and Denmark in November 2010. Consequently, as all of these loans are on the same legal footing, all creditors are legally entitled to call in their loans when the IMF loans are refinanced.

There would be no savings made if the other loans were refinanced, explained the minister. The Government is now seeking permission from all creditors to refinance the IMF loans on a unilateral basis.

If the Government is successful it would look to refinance the €15bn in three tranches of €5bn. The first tranche could be refinanced before Christmas, said the minister.

Mr Noonan said the restructuring of the promissory notes and the extension of the EU bailout loans had already improved the country’s debt sustainability.


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