Bailout continues as Ireland to get €3bn from EU and €3.2bn from IMF

The EU raised €3bn for Ireland with very strong investor demand, while the IMF has approved its latest disbursement of €3.2bn under the bailout programme.

The money will be paid over to Ireland next month, ahead of the repayment of €3.1bn on the Anglo Irish Bank promissory notes due on Mar 31.

The IMF warned that with Irish growth predicted to be just 0.5% this year, the challenges facing the country have increased since the start of the programme last year. Their comments differ slightly from the EU in that they are not urging further budget cuts to ensure the deficit targets are met.

Both payments follow a report from the troika after the fifth review of the programme and how the measures attached to the loans were being implemented.

The EU money, to be paid over on Mar 5, was raised on behalf of the European Financial Stabilisation Mechanism.

The bond has a 20-year maturity and pays a coupon of 3.375% and was priced at mid-swaps plus 78 basis points, at the lowest end of the initial price guidance for a total yield of 3.396%. Ireland will pay the borrowing rate without any margin.

The order book was closed within less than two hours following orders for more than €5.5bn from almost 120 accounts.

Demand came mainly from within the EU, with close to half from Germany and Austria, followed by Ireland and Britain with 30%, Netherlands 7%, and Italy 5%. Asian investors were allocated 3% and Switzerland 4%.

Asset managers and pension and insurance funds take 32% of the allocation, banks 19%, and central banks/official institutions 13%. Last year, €13.9bn was raised on the markets by the EFSM for Ireland. The fund contributes €22.5bn from the €67.3bn agreed from the EU/IMF.

The €3.2bn approved by the IMF will bring the total of its disbursements to Ireland to €16.5bn.

David Lipton, first deputy managing director and acting chair of the IMF, said the Irish authorities had continued strong implementation of the programme despite deteriorating external conditions, meeting 2011 fiscal targets with a margin and advancing structural reforms to support growth and job creating.

Growth of close to 1% last year followed three years of contraction and exports contributed to a current account surplus. The country’s bond spreads have declined significantly in recent months, although remain relatively high, he said.

“At the same time, the challenges Ireland faces have intensified since the outset of the programme, with growth expected to east to about a 0.5% in 2012, owing to a slowing in trading partner activity.

“The Irish authorities have responded by raising the fiscal consolidation effort adopted in Budget 2012, and the budget remains on track to meet an unchanged general Government deficit target of 8.6% of GDP. If growth should weaken further, the automatic stabilisers should be allowed to operate to help avoid jeopardising the fragile recovery.”