ANALYST SAYS ESM COULD GET INVOLVED IN PROMISSORY NOTE DEAL - Taoiseach Enda Kenny has said he is still confident of a deal on the Anglo Irish Bank promissory notes. In his own words, he wants to turn a high interest rate overdraft into a long term, low interest mortgage.
Lorcan Roche Kelly, chief euro strategist with Trend Macrolytics, says the interest rate on the promissory note was not really important as the interest was being paid to Anglo, which is in effect being paid to the state. He believes we could get the permanent bailout mechanism, the ESM, involved as Spain has already set a precedent. "The ESM paid €40 billion to the FROB - the Spanish bailout mechanism. They then gave bonds to the banks which were eligible as ECB capital," he points out. "The ESM could similarly give NAMA €30 billion in bonds that could cover the promissory note payments. NAMA could then give NAMA bonds to Anglo who would then pay down the promissory notes in full. The debt and the interest would have to be paid at some stage, but we'd lose the annual payment. It would become a normal bond,'' he explains. Lorcan Roche Kelly said it would be ideal to get the deal renegotiated within the ECB because the net interest is very low. However, the Bank is constrained by treaties and its hands are effectively tied, he adds. He says that the ESM is doing 30 to 40 year debt and availing of this would allow us to kick the debt out as far down the road as possible.
MORNING BRIEFS - Mining and exploration company, Kenmare Resources has a trading update out this morning. It has reported final revenue for last year of $234.5m for 2012, up from over $167m last year. It reported an improved market outlook and said it expects better pricing in the second half of the year.
*** Data storage and cloud solutions provider, EMC, had results for the fourth quarter out last night. It reported revenue of $6 billion - up 8% over the same period last year. But the company's full year profit forecasts did not meet expectations and the company said it was facing a tough first half. This caused its shares to fall in New York. EMC employs over 3,000 people here.
*** Online retailer Amazon's fourth-quarter net income fell 45% according to its latest results, missing Wall Street expectations. But, surprisingly, the company's share price went up 7% in after hours trading. The company reported earnings of $97m in the October to December period - down from $177m a year earlier.
*** The Irish Times is reporting this morning that VHI is about to hike premium prices for its one million plus customer base by up to 6%. Prices have gone up by between 11 and 17% in the last 15 months and the health insurance market in general is haemorrhaging customers. This is putting pressure on the remaining subscribers and on the public health system. VHI has over half the health insurance market here.
*** Ratings agency Moody's has posted another pessimistic outlook for the Irish banks. The agency said they will continue on a negative watch for the next 12 to 18 months. In a note published yesterday, Moody's said the outlook reflected its view that the Irish banking system had "not yet fully stabilised", unemployment is still high and too much international uncertainty is weighing on performance. It also expressed concern about the high rate of mortgage arrears.
*** Two US senators are questioning whether the Justice Department has been rigourous enough in prosecuting misconduct at the largest banks. They have asked the department to hand over information on how it determines punishments. The Senators - a senior Democrat and a Republican - said they believe certain Wall Street banks enjoy "too big to fail" status and the penalties they get are too low.