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Noonan outlines possible changes to promissory note deal

The Finance Minister has told the Dáil that the €3.1 billion repayment due next week could be converted to a long-term bond instead.

MINISTER FOR FINANCE Michael Noonan has outlined changes that could be made to the promissory note arrangement currently in place at the Irish Bank Resolution Corporation (formerly Anglo Irish Bank and Irish Nationwide Building Society).

Noonan told the Dáil that the Government is in negotiations with the European Central Bank to change the €3.06 billion payment due on 31 March into a long term Irish Government Bond.

The details of the arrangement still have to be worked out but the deal will mean the State’s cash outflow will not be affected.

Speaking at a private members debate, the Minister said,

Firstly, there is an issue that I wish to bring to the attention of the house as the Government has always committed that we would inform the Dáil about any development concerning the payment of the promissory note at the end of this month.

In more recent months, we have been involved in technical discussions on reducing the burden of debt associated with the recapitalization of the banks.  In particular our focus has been on the Promissory note arrangement that was put in place to fund the Irish Bank Resolution Corporation – formerly Anglo Irish Bank and Irish Nationwide. This is an arrangement, which requires the State to make cash payments of €3.06 billion each year to IBRC. There have been some developments on this issue during the day.

The discussions with the European authorities on the general issue continue but we are now negotiating with the EU authorities, and principally with the ECB, on the basis that the €3.06 billion cash installment due from the Minister to IBRC on 31 March 2012 under the terms of the IBRC promissory note could be settled by the delivery of a long term Irish Government Bond.  The details of the arrangement have still to be worked out.”

The surprise move, if it comes to fruition, would be quite a coup for the Government as it would avoid making the controversial payment on 31 March.

The bond which would be issued in place of the payment would not have to be paid until 2025. Therefore, the State would have another 13 years to pay back the €3.06 billion debt.

The Government has been criticised for its “vague announcement” with Opposition parties calling for more clarification on what such a deal would mean for public finances.

More on those Promissory Notes>

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