It has emerged that the claims of Local Authorities who held development bonds with Irish Bank Resolution Corporation, will be considered ahead of subordinated creditors as part of the wind-up of the bank.

Replying to a question from Fianna Fáil's Michael McGrath, Finance Minister Michael Noonan said that the Special Liquidators of the bank could be in a position to make an interim distribution to its creditors later this year.

Mr Noonan said that for the payment of proceeds from the liquidation, unsecured creditors will rank in priority to the holders of the subordinated debt. 

These unsecured creditors include debts from the Eligible Liabilities Guarantee scheme, which are payable to the NTMA, as well as debts on the Deposit Guarantee Scheme.

They also include unguaranteed depositors, Local Authorities, credit unions, suppliers and employees that are not preferential creditors.

They will be paid out after the costs and expenses of the liquidation process, preferential creditors, including certain taxes and employee and pension claims.

While welcoming the fact that an interim payment is likely to be paid to creditors later this year, Deputy McGrath said the public will find it "galling" that speculative investors who bought subordinated bonds at big discounts are also likely to receive a payout.

"With hindsight, it appears it was a mistake at the time of the IBRC liquidation for the Government not to convert some of its equity in to debt in a manner which would have ensured the State gets a greater share of the residual value of IBRC," he stated. 

"Any avenues that are still open to limit or prevent a payout to speculative investors should be fully pursued even at this late stage," he added.