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Anglo borrowed €8bn as Lenihan announced ‘final’ bailout cost

Anglo was borrowing up to €7.9bn to pay out on bonds – on the same day the government announced the cost of recapitalisation.

Image: Niall Carson/PA Wire

ANGLO IRISH BANK borrowed €7.9 billion at the end of September to in order to pay off some of its debts to bondholders – on the same day that finance minister Brian Lenihan announced the €29.3 billion total cost of recapitalising the nationalised bank. The initial government bank guarantee ended on the same day.

Anglo repaid the billions in outstanding bonds on September 30, funding the repayment through a number of sources, including the issue of new bonds. The Department of Finance denies it provided Anglo with the €7.9 billion needed to repay bondholders; a spokeswoman said the €7.9bn bond redemption was funded by “a number of funding sources including the issuance of new term debt”.

The bonds are essentially a form of borrowing by Anglo Irish Bank, with lenders investing in Anglo bonds in return for an annual ‘yield’ (interest) on their investment, and for having their investment returned in full on an agreed due date.

When bonds are due for repayment, banks can choose either to ‘roll them over’ by extending the due date, issue new bonds in order to finance the repayment of old ones, or borrow cash from elsewhere.

The massive scale of borrowing by the nationalised bank is likely to have been finalised just as finance minister Brian Lenihan was confirming the final cost of providing the bank with new capital – a massive €29.3bn – to the world’s media on September 30.

A spokeswoman for the Department of Finance stressed that the cost of the Anglo recapitalisation announced on September 30 was an entirely separate matter to that of the bank’s own funding, which is handled by the bank as an independently-managed entity.

She added that the state would not have had any role in funding the redemption of Anglo’s bonds and said that the schedule of repayments had been provided for in Anglo’s 2009 annual accounts and 2010 interim report.

Anglo’s own borrowings were not converted into sovereign debt, for which the state would be responsible, she added.

The Financial Regulator and Anglo declined to comment on the refinancing of the bonds when contacted by TheJournal.ie.

About the author:

Gavan Reilly

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