Vol. 503 No. 5
76 Mr. Cosgrave asked the Minister for Finance the action, if any, taken to secure the repayment of the costs for the bail out of Allied Irish Bank plc over the ICI insurance collapse; if he will give details in this regard including arrears of interest charges, if any, recovered in each year to date; and if he will make a statement on the matter. [10634/99]
The former Insurance Corporation of Ireland – now called Icarom plc – was taken over from Allied Irish Banks by the State and placed under High Court administration in 1985. The High Court administration of Icarom plc still continues and is not expected to be completed for some years. The final costs of the administration will not be known until it is completed.
The Exchequer contribution to the funding arrangements for the High Court administration of Icarom plc consists of two repayable loans totalling £132 million. A loan of £100 million was advanced to the administrator of ICI in 1985 and is repayable in 2000. This repayable advance was provided by way of a loan to the Minister for Finance from the Central Bank which was funded in turn by a deposit of £70 million placed by AIB with the Central Bank and £30 million of the Central Bank's own resources. Under the 1985 funding arrangements AIB and the other banks make an annual contribution of £7 million towards the interest costs of this loan for each year of its 15-year term of which AIB contributes £5.5 million. The Exchequer does not bear any of the interest costs of this loan.
The Exchequer advanced an interest-free loan of £32 million to the administrator of Icarom plc in 1993 following the conclusion of an agreement with AIB in 1992 for additional funding of the Icarom administration. The £32 million loan is repayable not later than 2012. The cost to the Exchequer of this loan is represented by the interest forgone which is estimated to amount to £2.1 million annually. Under the 1992 agreement AIB makes an annual contribution of £8.8 million to Icarom in each year from 1993 to 2012 inclusive. This contribution is in addition to the annual contribution which AIB makes under the 1985 funding arrangements.
The administrator of Icarom also benefited to the extent of £38.9 million from the settlement in 1993 of an action against the former ICI auditors, Ernst and Whinney.
The funding available to the administrator is expected to allow him to meet his foreseen liabilities, including the repayment of the Exchequer loans of £100 million and £32 million.
The Deputy may be aware that in a reply to a question from Deputy Deasy on 5 November 1998, I indicated that the estimated net present value (NPV) of the costs of the funding arrangements now in place for the Icarom administration, that is, the sum of all past and known future payments to the administrator, is £357 million of which 56 per cent is met by AIB, 8 per cent by the other banks, 27 per cent by Ernst and Whinney (former auditors of ICI) and 9 per cent by the Exchequer. The Exchequer share of this cost would be less than the figure indicated if the Exchequer loan of £32 million were repaid at a date earlier than the scheduled repayment date of 2012. Therefore, the final cost to the Exchequer cannot be determined until the administration is completed.
