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Markets News Afternoon: Embattled developer Carroll looks to recovery in 2011; Shares in sharp slides in Europe and US
By Finfacts Team
Sep 1, 2009 - 5:02:32 PM
Embattled developer Liam Carroll's Zoe group began his second bid to have court protection via the examinership process for a number of insolvent companies.
The Zoe group, comprising 51 companies, owes lenders almost €3 billion. Seven companies are involved in the effort to seek protection and they owe about eight lenders debts of €1.2 billion. It is seeking protection from ACC Bank, the Irish unit of Rabobank NV, which is demanding payment of a €136 million loan.
Previously, the Commercial unit of the High court and the Supreme Court, rejected the application for protection as the companies had not a reasonable prospect of survival.
Today, the court was told that Zoe companies have total annual income of €40m. Michael Cush SC, on behalf of the Zoe group, said the companies had shareholdings which yielded dividends of €10m.
He also told the court that the group would receive rental income of €17m from commercial property and €10m from 648 residential property units. The total rental income was expected to reach €30m by the end of the year. He said that in the course of the companies' business plan it was envisaged that 478 apartments could be sold.
Cush also provided details of the letters from banks which were willing to support Zoe's petition for examinership.
He said State-owned Anglo Irish Bank was willing to advance €68m to finish Block 1 on the North Wall Quay development and a further €8m to complete cladding on the building. Bank of Ireland and KBC Bank said they were receiving rent which covered the interest on debts and were supportive of the petition.
AIB was not receiving sufficient rental income from Zoe to cover debts, but the bank had extended finance to ensure that the group's unsecured creditors were largely paid. It also supported the petition. Bank of Scotland Ireland said it was prepared to advance a further €50m to Zoe and also backed examinership.
Earlier, Cush presented a number of economic forecasts which he said envisaged the recession's bottoming out in 2010 and a recovery beginning the following year.
But he said these commentaries were at odds with an assessment by UCD professor Morgan Kelly, who wrote a submission on behalf of ACCBank, which is opposing the petition by the Zoe group.
Professor Kelly's assessment said that because economic growth might return in 2010, it did not follow that there would be a recovery in house prices. His commentary also warned that commercial property prices could remain at 50% below their peak for up to a decade.
EBay, the online auction service, said today it will sell a 65% stake in its Skype Internet phone business to private investors.
The company said it will receive $1.9 billion in cash and a $125 million note from the buyer, an investment group led by the private equity firm Silver Lake including Index Ventures, Andreessen Horowitz and the Canada Pension Plan Investment Board.
EBay bought Skype in 2005 to use as a communication platform for merchants using its online marketplace to communicate with customers but the companies did not successfully integrate their services. EBay paid $2.6 billion in cash and stock for Skype.
In the second quarter, Skype's revenue grew 25% over the previous year to $170 million, as its number of registered users exceeded 480 million world-wide.
IATA said airlines had a combined net loss of $2 billion in the second quarter following $4 billion in losses in the first quarter.
Its sample of airlines was incomplete, so IATA -- which represents 230 airlines world-wide that account for roughly 93% of scheduled international air traffic -- estimates that losses exceeded $6 billion.
Passenger numbers and freight volumes in July rose 3% from June, but both remain below year-ago levels. "There was a material improvement (in travel) in July, but the future path is likely to be volatile and weaker than normal recoveries," today's report the report said.
Cuts in capacity have failed to keep pace with the decline in demand. Load factor, or the proportion of available seats that airlines fill with paying passengers, was 80.3% in July and could mark the high point for the year as the industry moves into a seasonally weak period and published schedules suggest some capacity growth ahead, IATA said.
"Elimination of excess capacity will be the key to stopping the decline in fares and stabilizing revenues as well as volumes,"IATA added.
Air-freight capacity utilisation in July rose to 47.6% from a low of 40% in January, but excess capacity continued to drive down rates, which fell more than 20% year-on-year.
Sixteen Asian-Pacific carriers posted losses of $1.29 billion during the second quarter, compared to losses of $958m a year ago. Twelve European airlines recorded $1.101 billion of losses during the period, slipping into the red from a profit of $439m a year ago.
Twenty North American airlines, however, trimmed their losses from $419m a year ago to $134m for the second quarter this year. Latin American carriers also improved profits from $5m in the second quarter last year to $485m, while Middle Eastern carriers saw profits rise from $7m to $20m.
Airlines take advantage of stronger equity markets to raise $15 billion to help cushion operating cash.
US construction
The US Census Bureau of the Department of Commerce announced today that construction spending during July 2009 was estimated at a seasonally adjusted annual rate of $958.0 billion, 0.2% below the revised June estimate of $959.5 billion. The July figure is 10.5% below the July 2008 estimate of $1,070.2 billion. During the first 7 months of this year, construction spending amounted to $543.8 billion, 11.4% below the $613.5 billion for the same period in 2008.
US manufacturing
US manufacturing activity expanded for the first time in 18 months in August, according to a report from the US Institute of Supply Management (ISM).
The Purchasing Manager's Index (PMI) rose to 52.9 last month from 48.9 in July, reaching the highest level since June 2007. Readings above 50 indicate expansion in the manufacturing industry.
Contract activity for pending second-hand home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2% to 97.6 from a reading of 94.6 in June, and is 12.0% higher than July 2008 when it was 87.1. The index is at the highest level since June 2007 when it was 100.7.
About 45% of current sales are as a result of foreclosures.
Vehicle sales
Ford has just announced that vehicle sales rose 17% in August, benefiting from the Cash for Clunkers trade-in government program.
US markets
US stocks fell, led by financial shares, as investor concerns banks will post more losses offset the data on manufacturing and pending home sales.
The Dow is down 153 points or 1.62%.
The Nasdaq has fallen 1.60% and the S&P 500 is off 1.64%.
On the New York Mercantile Exchange, oil for October delivery is trading at $68.95 down $1.01 from Monday's close. In London, Brent crude for October delivery is trading at $68.64 a barrel.
Currencies
The euro is trading at $1.4343 and at £0.8807.
For live currency updates, check the right-hand column of the Finfacts home page.The dollar traded at a record low $1.6038 per euro on July 15, 2008.
