Government to repay in full over €1bn Anglo bonds

The Department of Finance said it intends to go ahead with the full repayment of un-guaranteed, unsecured Anglo bonds worth over €1bn later this month.

The payments are the biggest to be made over the next two years by the Irish Bank Resolution Corporation, the wind-down vehicle for Anglo and Irish Nationwide. They will be made between June 26 and June 28, as an EU summit gets underway during which the burden of bank debt is likely to be discussed. They will also be made one year after Finance Minister Michael Noonan said during a trip to Washington that he would seek to impose losses on senior bondholders who lent to the toxic bank.

Mr Noonan said this week that the IBRC has confirmed that “two unguaranteed senior bonds with a combined principal value of €0.6bn are scheduled to mature on 26 June 2012”.

“IBRC’s position on its publicly traded securities remains unchanged. The Bank is contractually obliged to repay senior securities on their maturity dates.”

Two further repayments amounting to almost €500m will be paid on the June 27 and 28 to unguaranteed, unsecured senior bond holders. Despite pre-election promises to the contrary, the coalition appear to have given up on the prospect of burning senior bondholders. They are instead pursuing changes to the promissory note structure; a complex arrangement which involves the state paying €3.1bn a year to IBRC until 2024 to allow it to pay back the Central Bank for money borrowed to meet its debt.

The Government has been trying to secure agreement from European partners for a change to the promissory note payments since last November.

Minister for European Affairs Lucinda Creighton said at the weekend she is confident a deal will be reached this autumn. Any such deal is likely to involve a refinancing of the promissory notes via long-term loans from one of the EU rescue funds.

Junior finance minister Brian Hayes said the Government is seeking “re-engineering of the promissory note which is effectively paying for all of the toxic debt concerning the failed Anglo Irish Bank”.

The Department of Finance said it cannot give a time frame for the presentation of a technical paper from the bailout troika on changes to the promissory note system.