Ireland eyes market return

DUBLIN Fri Sep 9, 2011 6:14pm BST

A man adjusts an Irish flag as it flies next to a European Union flag near the EU Commission headquarters in Brussels October 2, 2009. REUTERS/Francois Lenoir

A man adjusts an Irish flag as it flies next to a European Union flag near the EU Commission headquarters in Brussels October 2, 2009.

Credit: Reuters/Francois Lenoir

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DUBLIN (Reuters) - Ireland is planning a phased return to the sovereign bond markets with a possible syndicated offer for longer-dated debt in 2013 but the fallout from Greece's debt crisis could scupper its strategy, the country's debt chief said on Friday.

Ireland's success in so far meeting its targets under an 85 billion euros (73.36 billion pound) EU-IMF bailout and an easing in the cost of that package have driven Irish bond yields back into single figures and helped distinguish Dublin from its fellow euro zone strugglers; Greece and Portugal.

The chief executive of Ireland's National Treasury Management Agency (NTMA) told the country's politicians a deepening crisis in Athens, which is struggling to meet its bailout targets, could hit hard.

"We envisage a phased engagement with the markets before we fully resume normal debt raising operations," John Corrigan told a parliamentary finance committee.

"(But) There are certain exogenous factors such as what happens in Greece which could throw us all off course."

Ireland's bailout funds will stretch to late 2013 but Corrigan said it may need up to 15 billion euros in market funding by the end of that year, given a 12 billion bond that comes due at the start of 2014.

He said the NTMA planned to ramp up its sale of short-term debt -- the current amount outstanding is just 500-600 million euros -- in the second half of 2012 before returning to longer-term debt markets with a syndicated issue, likely in 2013.

"It may not be a simple return, probably won't be, to the traditional method of issuing paper, which is via auction. We would probably have to go for syndicated deals where the terms are settled in advance."

Ireland's borrowing costs have dropped to around 8.5 percent from over 14 percent after European leaders agreed to extend the duration and lower the interest rate on Dublin's bailout as part of an agreement on a second package for Greece.

Corrigan said the concessions Ireland won on the cost of its official loans in July would save it 8.5 billion euros in total and mean its debt would peak at 116.5 percent of Gross Domestic Product (GDP) compared with a previous estimate of 118 percent.

MORE ASSET SALES?

The European Commission (EC) said on Friday Ireland's bailout was well on track, chiming with an earlier endorsement from the International Monetary Fund (IMF), and said its budget deficit was likely to be smaller than previously expected next year.

The Commission called for more clarity on Ireland's privatisation plans after the IMF urged Dublin on Wednesday to increase state asset sales to 5 billion euros from the 2 billion euros currently earmarked by the government.

Ireland's prime minister told reporters the troika of the IMF, the ECB and the EC, were looking for Dublin to raise far more than 2 billion euros.

"The programme for government commits us to realising 2 billion (euros) in the sale of state assets. The troika were not looking for a specific figure but for substantially more," Enda Kenny said.

Ireland has won plaudits from investors for coming clean on its banks' property debts and putting a 70 billion euros price tag on dealing with the issue but Corrigan said problems still lurked elsewhere in Europe.

"It is one of the strong selling points for Ireland that we have in fact rooted out the rot in the Irish banking system whereas in other jurisdictions there are big problems."

The head of Ireland's state-run National Asset Management Agency (NAMA), set up to purge the banks of their risky land and development loans, told the parliamentary committee on Friday that it would exceeds its target of raising 5 billion euros in property sales this year.

"We are currently in dialogue with quite a number of these (bidders) and over the coming months we expect to make some substantial transactions," Brendan McDonagh said.

Ireland's banks still remain dependent on emergency funding from the European Central Bank and the Irish central bank, however, with data on Friday showing they had outstanding loans totalling nearly 154 billion euros.

(Writing by Carmel Crimmins; Additional reporting by Padraic Halpin)

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