Irish, Portugal May Get Rescue-Loan Extensions, Noonan Says

Euro-area finance ministers will consider extending the maturities of rescue loans to Ireland and Portugal, Irish Finance Minister Michael Noonan said.

European authorities will examine whether to give Ireland and Portugal more time to repay loans from the European Financial Stability Facility, a euro-area bailout fund, and also loans from the European Financial Stabilization Mechanism, under which the European Commission can borrow with an implicit European Union budget guarantee.

“Lengthening maturities at low interest rates has the potential to enhance the sustainability of the Irish debt and over a period of time cost us less in servicing the debt,” Noonan told reporters in Brussels today before a meeting of EU finance chiefs. “This will make the overall debt position more sustainable and increase the willingness of the markets to lend to us at low interest rates.”

Noonan said in November that the government would examine the aid package given to Greece last year and would push for anything that helps Ireland exit its bailout program. European finance ministers agreed in November to cut Greece’s rates on bailout loans, suspend interest payments for a decade and give the nation more time to repay.

‘Full Market Access’

Bailout loan extensions have “the potential to improve the funding profile of the sovereign and increase its ability to gain the full market access necessary to successfully exit the bailout program,” said Juliet Tennent, an economist at Dublin-based Goodbody Stockbrokers in a note.

“This recognizes the efforts being made by well performing program countries,” Noonan said in a statement late yesterday. A report from senior officials on the proposal is due in March, he said today.

Portugal’s Finance Minister Vitor Gaspar initially championed the proposal to extend EFSF bailout fund maturities, with Ireland joining him yesterday to make a joint appeal to euro-area peers, Noonan said. A similar proposal will be made today at a meeting of EU finance ministers regarding EFSM loans, he said.

“The 27 may not agree as readily as the 17,” Noonan said. Ireland and Portugal aim to extend bailout loan maturities “to the longest term available,” he said, declining to give further details.

Irish Yields

Noonan said the push for longer maturities is “entirely separate” from Ireland’s campaign to get Europe to share the burden of the country’s bank bailout.

The yield on benchmark Irish October 2020 notes was unchanged at 4.17 percent today. At the end of 2012, Ireland had loans of 21.7 billion euros from the EFSM, with a weighted average life of 12.4 years. The country had loans from the EFSF of 12.7 billion euros with an average life of 11.7 years, according to the country’s debt agency.

Greece was given an extension of the maturities of the bilateral and EFSF loans by 15 years and a deferral of interest payments on EFSF loans by 10 years.

Before it's here, it's on the Bloomberg Terminal.