Ireland not likely to return to bond markets for funding before 2012

IRELAND COULD return to international bond markets for funding this year, but it is more likely to happen in 2012, the National Treasury Management Agency (NTMA) has said.

Chief executive John Corrigan said the agency was concentrating on finding new investors after a number of central banks and other investors shied away from holding Irish debt when its credit rating was downgraded.

“It’s possible we’ll get back in this year, it’s probable we’ll get back in next year,” Mr Corrigan said yesterday at the launch of the NTMA’s results for 2010.

The results show that the National Pensions Reserve Fund, which is managed by the NTMA, made an investment return of 4.5 per cent last year and had a total value of €24.4 billion as of December 31st. However, the return on the €9.5 billion of the fund that represents State investments in AIB and Bank of Ireland made a loss of 7.9 per cent. This dragged down the 11.1 per cent return it made on its “discretionary portfolio” of €14.9 billion as a result of a global stock market rally.

Although the agency would like to return to the bond market to raise fresh debt “sooner rather than later”, tensions within the euro zone would have to be worked out first, Mr Corrigan said.

The yields on the sovereign debt of Portugal, which is due to hold a bond auction next week, were “under huge pressure”, which was “extremely worrying”, he noted. “The mood music is very negative.”

The EU, the International Monetary Fund and the European Central Bank would “obviously be keen” to see Ireland return to a position where it could raise finance on the markets. “We don’t have to seek their approval and they would be very happy bunnies if they saw us in that position, because that would be proof positive that the programme is working.”

Last September, the NTMA cancelled remaining bond auctions for 2010 as the cost of State borrowing soared. Minister for Finance Brian Lenihan said at the time that Ireland would return to the market in 2011.

Mr Corrigan said the NTMA’s 10-strong debt management team would not be sitting on its hands while Ireland remained outside the market, but would be seeking investors who were comfortable investing in bonds rated BBB+ by credit ratings agencies.

Many central banks that previously held Irish debt have rules preventing them from holding BBB+ bonds. Large hedge funds “that buy into the recovery story” are now being targeted.

“Unfortunately, we’re now down fishing in the BBB+ pool,” said the NTMA’s head of banking Michael Torpey. “[We] have to go out and find this kind of investor and bring them onside, while, I might add, keeping the AA and AAA investors warm, because I would expect that in the fullness of time – and it will take time – we would get back up there.”

Mr Corrigan added that further downgrades to Ireland’s credit rating would not further reduce the pool of available investors. “I think the real damage has been done at this stage.” The agency has appointed a transition manager to oversee the planned disposal of €10 billion of the investments by the National Pensions Reserve Fund in quoted shares, mainly large-cap stocks.

Under the terms of the EU-IMF deal, some €8 billion of this money will be invested in the banks. About €6 billion will go into AIB, €1.5 billion has been earmarked for Bank of Ireland and about €400 million set aside for EBS.

The disposal will leave €4.9 billion in the fund’s discretionary portfolio. The agency noted there would be sufficient liquid assets within this sum for the proposed investments in infrastructure and water metering specified in the Government’s four-year plan.

€1BN PAYOUT CLAIMS AGAINST STATE

The State Claims Agency paid out €93.2 million in personal injury, property damage and clinical negligence claims in 2010, up 46 per cent on the previous year. The National Treasury Management Agency, which oversees the claims agency, attributed the rise to higher clinical negligence claims.

During 2010, the agency received 1,623 new claims against the State authorities covered by the agency, resolving 1,690 existing claims. By the end of the year, it had 4,114 claims under management.

The total estimated liability against all active claims was about €1 billion, €900 million of which relates to clinical claims. The agency said the portfolio of clinical claims was maturing. The remaining €100 million relates to employer liability, public liability and property damage claims.

The upward trend in civil actions against hospitals and medical practitioners was flagged by Minister for Health Mary Harney in September, when she said failure to protect patient safety in hospitals was having economic as well as human consequences.

The State Claims Agency is awaiting a new delegation order that will see it act as the fund covering bullying and harassment claims against State authorities.

In 2010, it took on the management of the Health Service Executive’s employer and public liability and third-party property damage claims for the first time.