European rescue funds will start raising cash on the market to help Ireland in January, starting with bonds issued by the European Financial Stability Mechanism, the European Commission said in a statement.
The European Union and the International Monetary Fund have granted Ireland 85 billion euros ($111.9 billion) in emergency funding for government needs and bank repair after the country's costs of financing on the market rose to unsustainable levels.
The European part of the aid is split between two funds -- the European Financial Stability Mechanism (EFSM), which is managed by the European Commission and the European Financial Stability Facility (EFSF) which is an intergovernmental vehicle for euro zone countries only.
The EU intends to launch a first bond at the beginning of January. The EFSF is expected to follow with its first bond issue toward the end of January, the Commission said.
The EU and the EFSF will however carefully analyze the markets after they reopen in the New Year and may adapt funding plans accordingly, it said.
The EU and the EFSF are rated triple A by the three major rating agencies, Fitch, Moody's and Standard & Poor's.
The expected 'AAA' rating of EFSF debt instruments is based on the credit enhancement provided by the 'over-guarantee' mechanism and cash reserves, Fitch said.
For full Fitch report, click on: http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=591685
The Commission said bonds issued by the EFSM will be denominated only in euros. The EFSF will also most likely issue in euros, the statement said, but it does not have any currency limitation for its funding activities and can adapt to market developments.
The issues for both EU and EFSF will be mainly in standard benchmark maturities of 5, 7 and 10 years, the Commission said.
In the first quarter of 2011, the EFSM and the EFSF will disburse 11.7 billion euros to Ireland.
In 2011, the EFSM will raise up to 17.6 billion euros for Ireland and up to 4.9 billion in 2012.
The EU intends to launch in 2011 four to five benchmark bonds aiming at 3 to 5 billion euros for each transaction. The EU may complement its funding needs by smaller bond issues, either through taps of issues launched under the EFSM or targeted transactions, the statement said.
In the first half of 2011 the market should expect 3 EU benchmark transactions, the statement said.
The EFSF will raise up to 16.5 billion euros in 2011 and up to 10 billion in 2012.
It intends, also subject to revision, to launch next year 3 benchmark bonds aiming at 3 to 5 billion euros for each transaction.
The EFSF may complement its funding needs by smaller bond issues, either through taps or through targeted transactions. Syndications, auctions and private placements may be used: In the first half of 2011 the market should expect 2 benchmark issues, the Commission said.
(Reporting by Jan Strupczewski, editing by Marcin Grajewski/Mike Peacock)