CENTRAL BANK governor Patrick Honohan is expected to raise the possibility of delaying a cash payment of €3.1 billion to the former Anglo Irish Bank on March 31st and suggest alternatives at the meeting of European Central Bank decision-makers today.
The restructuring of the promissory notes – the IOUs through which the State is paying for most of the €35 billion cost of Anglo and Irish Nationwide – is unlikely to be finalised by the time the next €3.1 billion cash payment on the notes falls due at the end of this month.
As a result, the authorities are considering alternatives to the cash payment to buy time on this instalment as the restructuring of the notes is finalised in talks with the troika.
Options being considered to delay the cash payment include a payment-in-kind by way of a Government bond or another promissory note until a long-term restructuring of the notes is concluded.
The ECB governing council meets today for its monthly session on interest rates and Mr Honohan, a member of the council, is expected to raise the possibility of a substitute to the cash payment.
The Central Bank and the Department of Finance had no comment on the plans. A spokesman for the department said that negotiations on the notes were “progressing” and that it was a “medium-term process”.
Deferring the cash payment outright without an alternative could be regarded as a default by the State.
Any alternative must be agreed by the ECB as the Irish Central Bank is the main beneficiary of cash paid to Anglo, which is now known as Irish Bank Resolution Corporation.
The promissory notes are used by the defunct bank as collateral to borrow tens of billions of euro in emergency loans from the Central Bank, with the ECB’s approval, to fund IBRC’s remaining loans.
Any cash payment to the bank is used to reduce these emergency loans, which stood at about €40 billion at the end of last year.
Alternatives to the cash payment emerged as Taoiseach Enda Kenny dismissed suggestions a deal on the restructuring of the notes would be concluded by the end of this month.
“I will not stand up and commit to a heightened expectation that this can be delivered in a fortnight or three weeks. This is a serious matter for the country, the economy and the people,” he said.
Mr Kenny told the Dáil that no deal had been concluded and insisted that it was a separate matter to the EU stability treaty. Discussions were continuing at European level about the notes, he said, but there was no timetable to resolve the problem.
He distanced himself from the comments of Minister for Social Protection Joan Burton who linked a resolution of the notes issue to support for a Yes vote in the referendum on the treaty. No date had been set for the referendum, he said.
The last government created the promissory notes to cover €31 billion of the €35 billion cost of Anglo and Irish Nationwide but to be valued at this amount the notes must pay a high rate of interest.
The interest on the annual payments on the notes, which run until 2031, will cost the State a further €17 billion. The Government authorities are working with the troika to restructure the notes to reduce the high cost of the two failed lenders.