Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context

Question 51: To ask the Minister for Finance the amount of loans drawn down to date from each source under the EU-IMF programme of financial support for Ireland; the expected drawdown date, including the amount of each drawdown, for the remainder of the loans; a schedule of annual repayments and the applicable interest rate payable for all loans under the programme taking account of the various interest rate reductions; the way this compares to the original schedule for repayment and the net present value of savings achieved as a result of the interest rate reductions, fully taking account of any extension of the maturity of the loans; and if he will make a statement on the matter. [35302/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

The table below sets out the loans drawn down to date from each source under the EU-IMF programme of financial support for Ireland along with the interest rate for these loans. The interest rates reflect the interest rate margin reductions agreed recently in respect of loans from the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM).

Table 1: Loans drawn by Ireland under the EU/IMF Programme – as of 14th November 2011

1. Headline interest rates charged on the nominal loan amounts. Does not include fees, adjustments, negative carry etc.

2. The disbursement from the EFSF was €3.59 billion after the retention of the General Cash Buffer which was the present value, at the time of disbursement, of the Margin of 247 basis points over the life of the loan. This credit enhancement measure was to ensure that the EFSF retains its top AAA credit rating and, thereby, minimize its cost of funds. Following the amendment to the EFSF Framework Agreement, the margin on Ireland's EFSF loans has been set at zero. This prepaid margin will therefore be the subject of a rebate to Ireland in July 2016 when the underlying bond has been fully redeemed.

3. The UK has announced that it will reduce the margin on the bilateral loan which is currently 2.29%. The amount of this reduction has yet to be decided. The interest rate is the euro annual equivalent at the date of drawdown.

4. The repayment schedule for IMF EFF loans consists of 12 semi-annual repayments until maturity that commence 41⁄2 years after drawdown. Interest is paid quarterly on standard dates. The average life of these loans is 7.5 years.

5. The estimated euro equivalent rate on credit outstanding is 4.79% (pricing 7th September 2011) after hedging. IMF borrowings are denominated in Special Drawing Rights (SDRs) and are drawn under the IMF's Extended Fund Facility. SDR interest rates are reset weekly.

6. See note 5. A change in the margin will impact the overall weighted average interest rate.

Under Ireland's EU-IMF Programme a total of €67.5 billion in loans will be provided from EU facilities, bilateral loans and the IMF. Some €30.5 billion of this has already been disbursed. The schedule of future disbursements is kept under constant review and is the subject of discussion at each quarterly review. Disbursements take place following the completion of the review process, with the approval by EU Finance Ministers at Eurogroup and ECOFIN and the IMF's Executive Board, of the reports prepared, respectively, by the European Commission Services and IMF staff. The actual disbursements take place in the period following approval.

The latest published information from the Troika on the disbursement profile relates to the drawdown profile agreed. The annual amounts agreed are shown in table 2.

Table 2: Drawdown profile of EU / IMF funding

As noted above, the disbursements set out in this table may be revised on foot of the quarterly review; furthermore, the timing of the final approval process may result in some of the disbursements envisaged following the 4th review, which are scheduled for December, taking place in early 2012.

The funds to be sourced from the EU in the course of the Programme include an estimated €4.8 billion of bilateral loans from the UK, Sweden and Denmark. Under the bilateral agreement with the UK, worth a total value of Stg£3.2 billion (€3.8 billion, based on the conversion rates prevailing in November 2010, is the assumed value in the table above), the funds are to be disbursed in eight equal tranches with the first one having occurred in October 2011. For the Sweden and Denmark bilateral loans, it is assumed that the draw downs are spread evenly over 2012 and 2013.

The overall interest rate excluding fees, adjustments and negative carry on loans drawn down to date, is 3.55%. The interest rate on undrawn amounts will depend on the cost of funds to the EFSF and EFSM in the capital markets at the time of drawdown and this cannot be quantified as it depends on future capital market conditions. There is no interest rate margin on either EFSF or EFSM loans at this point. There is a Guarantee Commitment Fee for the EFSF Guarantor Countries of 0.10% per annum. The margin which was prepaid by Ireland on its EFSF loan drawn in February 2011 will be the subject of a rebate in July 2016, when the bond issued to raise funds for the loan is redeemed. Repayments on EFSF and EFSM loans are bullet and are made on the maturity dates shown in Table 1 where the structure of IMF repayments is also explained. In relation to IMF loans, the interest rate on undrawn amounts will depend on the hedged variable Special Drawing Rights interest rate and quota reform timing.

The NTMA estimates that interest payment savings as a result of interest rate margin reductions on the EFSF and EFSM and UK Bilateral (subject to confirmation) loans over the course of the 7.5 years originally agreed as the weighted average life of the programme will be over €9 billion. The expected impact of quota change in the IMF may bring this figure to over €10 billion. This amount represents the expected cash savings, which is the appropriate measure in considering the benefit to the future budgetary position.