The €90 million additional cost in 2012 of using a Government bond to meet the Promissory Note payment due at the end of March instead of borrowing under the EU/IMF Programme was estimated by subtracting the €80 million interest costs under the Programme from the total estimated cost of €170 million arising from the Government bond. This total cost, based on a projected nominal issuance of €3.53 billion, had two elements. The first element consisted of the estimated interest arising from the coupon of 5.4% and the second, technical adjustment, relates to the difference between the project nominal issuance of €3.53 billion and its €3.06 billion market value.
The rationale for the technical adjustment is that the difference between the nominal and market values has to be accounted for in general government deficit terms. Under ESA95 accounting rules, this difference is classified as interest and accrued over the lifetime of the bond. Due to changes in pricing, a lower bond nominal amount of €3.46 billion was issued giving a difference between the nominal and the market value of around €400 million. Based on the remaining bond term of just under 13 years, the annual accrual in a full year is €30.8 million (€400 million divided by 13). In respect of the calendar year 2012, as the bond was issued at the end of March 2012, the accrual amount for three quarters of 2012 is estimated to be around €23m.