The Irish Independent reports that embattled developer Liam Carroll's 29.8pc stake in Irish Continental Group (ICG) was placed on the market yesterday afternoon at €12.30 a share -- erasing fears that loans underpinning the stake would end up in the National Asset Management Agency (NAMA).
Goodbody Stockbrokers managed the sale for Allied Irish Banks, which has effectively been in control of the position since it appointed a receiver to the developer's South Morton investment vehicle, which held the shares.
The bank had lent Mr Carroll up to €175m to build up his stake in 2007. However, the placement of the stock only generated €87.8m, meaning AIB most likely faces having to write down half the value of the loan.
Still, sources close to Mr Carroll have indicated to market participants they are aggrieved that the stock was placed at a discount to the market price. They have argued that the bank had a duty of care to mitigate losses on his loans.
Shares in the group closed yesterday down 4.1pc at €12.85.
It is also understood that representatives of a potential 'white knight' had been in contact with AIB about the stake in recent weeks, but the bank was concerned about prospects of executing a deal with that party, believed to be based in the UK.
Market sources also said it would have been hard to place such a large stake without offering some discount to whet the appetite of a broad range of investors. The stock was placed among 30 institutions -- comprising both clients and non-clients of the broker.
ICG had become a very illiquid stock since it was first 'in play' two years ago and almost 70pc of the stock was mopped up by three distinct, sizeable blocs of shareholders.
The remaining holding had largely become the plaything of hedge fund-type investors, who have been hopeful of making a gain out of corporate activity in the group.
ICG was the subject in 2007 of two abortive takeover attempts -- by a management buyout team led by chief executive Eamonn Rothwell and the so-called Moonduster consortium, headed by Philip Lynch.
Both sides had enough stock to block the other -- and Mr Carroll was in a position to stand in the way of either getting a deal over the line.
A second attempt to buy the group earlier this year -- as former rivals Mr Rothwell and Moonduster joined forces -- also fell through, partially because it failed to secure the backing of Mr Carroll.
Observers said yesterday that the placement of Mr Carroll's holding may improve the chances of perennial takeover talk surrounding the group finally resulting in a deal in the near term.
The Irish Independent also reports that Allied Irish Bank is expected to back down on plans to pay its new boss more than the €500,000 salary cap insisted on by Finance Minister Brian Lenihan.
The bank was on a collision course with Mr Lenihan over its plans to appoint one of its own senior executives, Colm Doherty, as its managing director, on a salary of €633,000.
But Mr Lenihan hit back, saying the Government was "not willing to break with the established guideline" on pay limits.
There was speculation in banking circles last night that the standoff amounted to little more than a 'phoney war' destined to end in victory for Mr Lenihan.
The Department of Finance made it clear that AIB would not be able to breach the €500,000 salary cap because it was legally provided for in the state banking guarantee. It also pointed out that the bank could not defy Mr Lenihan's wishes because the State had 25pc of board voting rights within AIB following the €3.5bn recapitalisation of the bank.
The Irish Times reports that the Government confirmed yesterday that it was not willing to breach the €500,000 maximum salary guideline for the banks in the case of the appointment of the new head of AIB, Colm Doherty.
Arising out of an Irish Times report that Mr Doherty was to be appointed AIB managing director at a salary expected to be about €633,000, the Minister was asked on RTÉ radio whether his instruction to the banks regarding a €500,000 overall salary cap for chief executives still stood.
"Absolutely," Mr Lenihan told interviewer Sean O'Rourke on News at One , adding that the Government was not willing to breach the guideline in this instance.
"The position is that I received a request from the Allied Irish Bank . . . it arrived in my department at seven o'clock yesterday evening," the Minister said. "It was mentioned to me, I think, at about half-past eight, and that was a request to exceed the guideline in a particular case.
"I considered the matter, made no decision on the matter, contrary to all the reports about 'coaches-and-four' being driven through the Department of Finance and other State agencies.
"And naturally, as any Minister for Finance would do in the circumstances, I brought it to my colleagues in Government this morning. I have just left the Cabinet meeting, and I can tell you that the Government are not willing to break with the established guideline in this case."
He could not account for this matter being in the public domain before the Cabinet meeting: "But I can tell you that there is a clear position as far as the Government is concerned, as far as I'm concerned; the guideline has not been breached in this case."
He was "very disappointed" to hear Opposition spokespersons "making various comments about who they would select as the chief executive of the AIB".
Pointing out that one of the public interest directors at AIB was former tánaiste and Labour leader Dick Spring, the Minister said: "He has contacted me in recent weeks and made clear to me that they have done an exhaustive interview of various candidates and, to date, have not been able to establish an external candidate for appointment to AIB."
He added: "I don't know Mr Doherty. I did express a preference to Allied Irish to have an external appointment. I'm satisfied from looking through the files and from the work Dick Spring did on this that it wasn't possible to obtain an external appointment."
Responding to a question from Fine Gael leader Enda Kenny in the Dáil yesterday, Taoiseach Brian Cowen said: "The Government have made clear what the arrangements are in relation to our position regarding the filling of the position of CEO, in line with decisions that we communicated in March.
"That's the position. And the board brought forward a name which they believe to be the person best qualified, given all the choices they had, to run the bank, based on those who were available to do so."
He said an issue came into the public domain yesterday before Mr Lenihan had "been given an opportunity to give proper consideration to it. He has now communicated to the bank the position that he holds, supported by the Government, and we now await developments in that respect."
Earlier, Labour deputy leader Joan Burton said: "AIB's determination to appoint an insider to the top position is a reflection of the fact that little has changed at the top in the banks and that, despite the enormous damage to the economy and cost to the taxpayer, they want to return to business as usual as quickly as possible."
Fine Gael spokesman on enterprise, Leo Varadkar said: "I note that Mr Lenihan claims he has not approved these arrangements.However, he has accommodated every demand from the banks to date, from the bank guarantee onwards. Brian Lenihan is the bankers' man in Leinster House. He must now refuse the appointment and the salary level."
The Irish Times also reports that the National Treasury Management Agency (NTMA) raised €1 billion yesterday in its final bond auction of 2009.
This brings the total raised in the bond markets this year to €33.8 billion. Of this, €10.8 billion was issued through a series of nine monthly auctions, with €23 billion raised in four syndicated issues. A further €1.4 billion in funding was raised in the small or retail debt market.
The Irish bond auction came as European Central Bank (ECB) president Jean-Claude Trichet warned that budget excesses in some European countries could still derail economic recovery, although the outlook was generally looking up.
Mr Trichet said some countries were running the risk of losing markets' faith due to excessive deficit and debt levels.
"Some countries are in a relatively favourable position because their past management was wise and prudent, while others are already very close to losing their credibility," he told French newspaper Le Monde.
"The success of the recovery in Europe depends on the confidence of investors in the creditworthiness of sovereign issuers."
Portugal, Greece and Ireland have either had their sovereign bond ratings downgraded or been put on review by major credit agencies in recent months.
Yesterday there was solid demand for the bonds. There was some €200 million of 4 per cent debt maturing in 2014 to yield an average of 3.072 per cent, and €800 million of 5.9 per cent debt maturing in 2019 to yield 4.735 per cent.
Investors bid for 7.9 times the 2014 debt offered and 2.5 times the 2019 securities offered, the NTMA said. In total, bids for €3.63 billion were received.
"Greater risk appetite generally among market investors helped in having a successful sale, but there is no doubt that international investors are feeling increasingly comfortable about buying Irish paper," said Bloxham economist Alan McQuaid.
Bond sales may decline in 2010 because of an expected drop in redemptions and the use of some money raised this year to pre-fund for 2010, Anthony Linehan, deputy director of funding and debt management at the NTMA, said last week.
Mr Linehan also said the extra yield investors demanded from holding Irish bonds over the benchmark German government securities should narrow in the coming months as there was "greater clarity" about the financial situation in Ireland.
The difference in yield, or spread, between 10-year Irish securities and 10-year German bonds was 139 basis points yesterday, compared with 153 basis points a month ago.
The Irish Examiner reports that the currency crisis is costing thousands of jobs and putting the viability of Ireland’s export-dependent agri-food sector under threat, according to a report launched in Dublin yesterday.
Key messages from the recent economic and agri-food industry leaders in Dublin have been incorporated into the report by the Irish Management Institute.
The report, which is to be presented to the Government, identified the 30% depreciation of sterling against the euro as a significant threat to the economy,
IFA president Padraig Walshe said the British government’s deliberate policy to weaken sterling is hitting Ireland hard.
"The problem is especially acute for the agri-food sector, which exports over 40% of its products to Britain.
"Cheaper British imports into Ireland are threatening fresh produce production in the home market," he said. Mr Walshe said the IFA estimates that by year end job losses in the sector as a result of the sterling devaluation will top 10,000.
He said exports in the agri-food sector, with its high dependence on Britain, will be down by €1.1 billion this year. "The stark impact is being felt in every farm home this winter. For example, an average Irish beef producer has seen his income fall by at least €2,000 because of the currency crisis," he said.
Mr Walshe said the European Commission must look at the reintroduction of monetary compensatory amounts to compensate exporters for fluctuations in exchange rates between the member states.
The IMI report contains 15 key points for the agri-food industry including the need to invest in the primary production base, reducing bureaucracy and other uncompetitive costs in the economy, protecting farm families from price and income volatility, and regulation of the retail sector to rebalance the food supply chain. Mr Walshe called on the Government to immediately take on board the key points in the report.
"Government investment in primary production by maintaining key farm schemes is essential to achieve the potential of the sector, including the opportunity for the agriculture and forestry sectors to contribute to meeting Ireland’s greenhouse gas emissions and renewable energy targets," he said.
The Financial Times reports that growth in Europe is likely to be anaemic in the short-term but longer-term prospects for business are still healthy, according to some of the continent’s leading chief executives.
In a series of interviews with the Financial Times, chief executives spoke of their continued belief in Europe despite its portrayal by some as increasingly stuck between a buoyant Asia and a still-mighty US.
“We’ve been through something that is not just a normal economic downturn. It is going to take a while to get back to where we were. It is going to be very mundane growth. But ultimately, I would be optimistic for Europe,” said Michael O’Leary, the bluff chief executive of low-cost airline Ryanair.
Peter Sands, chief executive of Standard Chartered, may be an evangelist for Asian growth – where his bank does most of its business – but said that Europe could not be written off: “[It is] just such a big part of the world economy.”
Their comments come as Europe has moved out of its deepest recession in decades, after growth in the third quarter was 0.4 per cent in the eurozone.
But corporate profitability remains in the doldrums, although it is improving. Third-quarter results showed that profits were down 18 per cent compared with last year for eurozone companies. But compared with the previous quarter, they were up 11 per cent, suggesting that the worst was now over.
As the economy and profits begin to recover, chief executives are starting to return to what they see as the big themes for the future: the shift of economic power towards emerging markets, the future of manufacturing and the role of governments.
David Michael, the head of the globalisation practice at Boston Consulting Group, speaks for many business leaders when he argues that “up to 90 per cent of global growth will come from major emerging markets”.
While that spells problems for Europe’s economies, many of the continent’s largest companies remain sanguine. They are targeting strong growth in these emerging countries to counter the sluggishness of their domestic markets. The chairman of a leading Swiss company said: “It is an exaggeration but it is almost that Europe can do badly and we can do well because we are in emerging markets and the US.”
On the future of manufacturing on the continent, Carlos Ghosn, chief executive of French and Japanese carmakers Renault and Nissan, has drawn up a list of activities that will prosper in Europe, those that will die and those in between. What is striking is how he often makes government support the differentiating factor as to what falls in each list.
So, green products, heavily pushed by European governments through subsidies for technologies such as wind and solar power, “will play a big role”, said Mr Ghosn. Low-cost products will “not have a role in Europe”, he continued. And he meant not just western Europe: “They will go to North Africa, India and China but not eastern Europe over the long term”.
Eastern European chief executives would rail against that idea, with Jacek Krawiec, the head of PKN-Orlen, Poland’s largest oil company, emphasising the higher growth potential of his region compared with western Europe.
The role of governments is controversial, with questions over what happens when governments withdraw their support for an industry. Mr Ghosn himself notes the “adverse effect” that will come next year after the end of various car scrappage schemes.
And while companies seemed optimistic about the future of European business, they were less sure about Europe’s place in the world. Mr O’Leary, asked about the rapid growth of emerging markets, said: “I don’t think Europe gets left behind – it just gets increasingly marginalised.”
The FT also reports that it took Barack Obama 30 minutes on Tuesday to whizz through the Forbidden City in Beijing following what was characterised as a candid three-hour discussion between the US president and Hu Jintao, his Chinese counterpart. At the end of his chilly tour, Mr Obama exited through the Gate of Continuous Harmony.
Mr Obama will doubtless be treated to the customary barrage of disharmony by conservative critics back home about having soft-pedalled in public on the human rights criticisms that normally arise during a US presidential visit to China.
But US officials insist that in private Mr Obama had “pulled no punches,” Jeff Bader, Mr Obama’s senior Asia adviser, said Mr Obama gave Mr Hu the most frank talk on human rights he had heard in his 30 years of dealing with US-China relations.
At their joint appearance in the Great Hall of the People following their meeting, both leaders gave the impression that there had been sharp disagreements on a wide range of issues – in addition to Tibet, which Mr Obama finally raised, having hitherto gingerly sidestepped the troubled province.
Reading from separate statements, Mr Hu emphasised the need to “oppose and reject protectionism in all its manifestations,” which was code for having brushed off US complaints about China’s large trade surpluses. Mr Obama referred to the need to move beyond the dollar-renminbi peg, which the Americans see as a form of Chinese mercantilism – again, signalling there had been little progress.
“I underlined to President Obama that given our differences in national conditions, it is only normal that our two sides may disagree on some issues,” said Mr Hu, his hands firmly grasping the lectern. “What is important is to respect and accommodate each other’s core interests and major concerns.”
It may take months, even years, to judge whether Mr Obama’s approach of friendly strategic engagement with China will bear fruit in the form of more substantive Chinese help in helping America tackle what one US official called the “global headline issues,” such as climate change, nuclear weapons proliferation and global economic imbalances.
Both countries eschew the term “G2”, for fear of offending other players.
But in practice Tuesday’s lengthy joint statement, which covered everything from clean energy to space technology, marked the attempted launch of a G2 global steering committee between the world’s largest democracy and the world’s largest autocracy.
“There are really only two countries in the world that can solve certain issues,” said Jon Huntsman, the US ambassador to China and former Republican governor of Utah, whose fluent command of Chinese has already gone down well with his hosts. “So the meetings really have been aimed at co-ordinating like never before on the key global issues … There wasn’t a single issue that was left out.”
Much like the lengthy statements that the US and USSR produced during their rare bouts of detente, however, a great deal of continuing disharmony could be read between the lines. In addition to the lack of progress on China’s dollar link, the two sides evidently failed to reach common ground on the bulk of Mr Obama’s agenda.
These included Afghanistan, which Beijing sees as a pointless war and which Mr Obama is about to intensify with a new surge of troops. “There is a modest level of willingness to be more helpful on Afghanistan but they [China] are never going to be fully invested in it,” says Andrew Small, a researcher at the German Marshall Fund.
Likewise, there seemed to be little meeting of minds on Iran, where Mr Obama on Tuesday promised “consequences” should Tehran fail to comply with international demands but on which Mr Hu was largely silent. “China wants to see more dialogue on the Iran issue,” said Jin Canrong, international relations professor at Renmin University. “We need more time to see if this approach is going to work.”
Both sides put a brave face on climate change. But their announcements of a series of new clean energy initiatives, from carbon capture research to a project on electric cars, could not paper over the fact that both had sharply downgraded prospects of a big deal on climate change in Copenhagen next month at the Asia Pacific summit in Singapore last weekend.
In his concluding remarks, Mr Obama said: “The United States welcomes China’s efforts in playing a greater role on the world stage – a role in which a growing economy is joined by growing responsibilities.” It remains to be seen whether China genuinely agrees with the second half of that statement.
The New York Times reports that fear, apparently, can be a powerful inducement.
The Internal Revenue Service said Tuesday that more that 14,700 Americans had been attracted to an amnesty program in recent months and disclosed their secret foreign bank accounts — many more than had been attracted to a previous I.R.S. program.
And the reason, Justice Department and I.R.S. officials said, was the widespread publicity about the agreement in February by the Swiss banking giant UBS to pay $780 million and admit to criminal wrongdoing in selling offshore banking services that had enabled tax evasion. In August, under legal pressure, UBS agreed to turn over the names of about 4,450 American clients suspected by the I.R.S. of using the bank’s offshore services to evade taxes.
UBS clients who did not come forward and whose names are on the bank’s list of accounts face back taxes and fines that can exceed what they own, as well as potential prosecution and jail time.
So it was probably not a surprise that many of the 14,700 who were lured to the I.R.S. amnesty program were UBS clients.
“We have now gained access to thousands of taxpayers and bank accounts that we have never had before,” Douglas H. Shulman, the I.R.S. commissioner, told a news conference on Tuesday.
Last month, the I.R.S. said that 7,500 taxpayers from dozens of banks, including UBS, had come forward as the Oct. 15 disclosure deadline approached, agreeing to repatriate the assets and pay back taxes and interest as well as reduced penalties.
“We are talking about billions of dollars coming into the U.S. Treasury,” Mr. Shulman said. He said that Americans living or working in over 70 countries had come forward, some by contacting diplomatic attachés, adding that “we had a flood at the end.”
A previous I.R.S. initiative, in 2003, aimed at luring Americans who evaded taxes through offshore credit cards, drew only 1,300 evaders, according to I.R.S. data.
Bolstered by the investigation of UBS, the Justice Department and the I.R.S. are expanding their scrutiny of other banks that offer questionable offshore accounts, not just in common tax havens like Switzerland and Liechtenstein, but other places as well, like Hong Kong. They are also looking at the web of financial advisers, lawyers, accountants and others who help the banks sell their services.
Mr. Shulman on Tuesday also announced the criteria being used by UBS to release the names of account holders suspected of offshore tax evasion. The criteria, which had not been disclosed earlier, have drawn attention in financial and legal circles because they effectively provide a road map as to how the I.R.S. and the Justice Department intend to pursue tax evasion cases at major banks.
According to the I.R.S. documents, UBS will generally disclose American clients who had unreported accounts of at least a million Swiss francs (about $988,000). UBS will also disclose Americans who were the owners of secret offshore sham company accounts with that total. The accounts in question cover 2001 through 2008.
For accounts that UBS deems to have involved “tax fraud or the like” — a new term that covers concealment of funds, the submission of incorrect or false documents to UBS or the I.R.S., and what the I.R.S. terms “a scheme of lies” — the balance may be less than a million Swiss francs but more than 250,000 Swiss francs (about $247,000).
UBS will also disclose accounts for which holders did not file a special disclosure document, called a W-9, over at least three years since 1998, and for which the accounts generated annual revenue to the client of at least 100,000 Swiss francs.
Mr. Shulman said that the number of voluntary disclosures would not affect the obligation of UBS to disclose 4,450 names. UBS had selected 500 names so far, I.R.S. officials said.
“If 10,000 accounts come in through voluntary disclosure that are UBS, it triggers the withdrawal of the John Doe summons” — the legal case, Mr. Shulman said. But if 10,000 UBS clients come forward, “it has nothing to do with the obligation that the Swiss have taken to the U.S. government to produce 4,450 names” to the I.R.S., he said.
The 4,450 accounts at one point held $18 billion, according the I.R.S.
UBS is giving the client names to the Swiss tax authority, which will forward them to the I.R.S. In a statement on Tuesday, “UBS said it was “confident that it will comply in a timely manner with all of its obligations.” UBS said in July 2008 that it would get out of the business that had brought it under scrutiny by the I.R.S. and Justice Department.
“The new UBS is organized in a way that such a situation as the one in the U.S. cross-border business can never happen again,” the bank statement said.
The NYT asks: How much good will can an apology — and half a billion dollars — buy? A lot, Goldman Sachs is hoping.
After first staunchly defending its outsize profits and pay, and then bristling at calls for restraint in these tough economic times, Goldman is trying a new tack: It is apologizing for past mistakes that led to the financial crisis — and sharing at least some of its riches.
A little more than a week after Goldman’s chairman and chief executive drew fire for saying the Wall Street giant was “doing God’s work,” the bank said Tuesday that it would spend $500 million — or about 3 percent of the $16.7 billion it has so far set aside to pay its employees this year — to help thousands of small businesses recover from the recession.
At the same time, the executive, Lloyd C. Blankfein, also showed a bit of humility, acknowledging at a conference in New York that Goldman had made mistakes, and that it was sorry. “We participated in things that were clearly wrong and have reason to regret,” he said. “We apologize.”
It was the clearest public statement of regret yet from Goldman, and a few hours later, as if to underscore that apology, the bank said that it was working with its largest shareholder, the billionaire investor Warren E. Buffett, to help 10,000 small businesses. The bank will offer them business and management education, mentoring and access to capital.
Across Wall Street, banks have regained their profitability — but not their public standing. With big banks minting money while many ordinary Americans are struggling, the financial industry has become the object of derision on “Saturday Night Live” and in the pages of Rolling Stone magazine, which branded Goldman “the great vampire squid wrapped around the face of humanity.”
Goldman insisted Tuesday that its new charitable initiative, the largest in its history, was not motivated by its current public relations headache.
The program, which Bloomberg News first reported a few hours before the announcement, will be guided by an advisory council led by Mr. Blankfein; Mr. Buffett; and Michael Porter, a professor at Harvard University, and also includes other big name backers like R. Glenn Hubbard, dean of Columbia Business School.
Goldman Sachs has bounced back spectacularly from the financial crisis and is planning to pay out billions of dollars in bonuses for the year. Goldman says it has to pay its employees well to retain top talent.
But while its fortunes have soared, its reputation has sunk.
The reputation problems of banks have thrust Wall Street’s public relations professionals to the forefront. The main securities industry trade group has taken steps to bolster its image by hiring Brunswick, a top public relations firm, whose partners include the former head of public affairs and the chief of staff to Henry M. Paulson Jr., the former Treasury secretary.
But Goldman’s image problems have been the most acute on Wall Street, and it has become a punching bag for an industry that is seen by many to have benefited unfairly from billions in taxpayer dollars. Goldman has tried a gamut of different strategies to fix its blemished image.
Mr. Blankfein has assumed a higher profile, giving speeches in which he has set out Goldman’s position on financial reform. In October, Goldman announced it was doubling the size of its charitable foundation, which focuses on education, by $200 million — a step that backfired when it was interpreted as a move to silence public criticism. Its effort to court the press by inviting journalists into its Manhattan headquarters to explain how exactly it makes its billions also fell apart when Mr. Blankfein made his remark about “doing God’s work,” and the public anger has not died down.
On Monday, 200 protesters marched to Goldman’s offices to protest its bonuses, according to Andrew Stern, president of the Service Employees International Union, who led the protesters.
He cautiously welcomed Goldman’s step on Tuesday.
“It’s a down payment, a step forward and hopefully a precursor of a different discussion — in the long run, how do we build an economy where everyone can share in the success?” he said. “But if this is an isolated public relations activity, it’s insufficient."
Goldman said it had been working on the small-business project for nearly a year, and first considered committing the $500 million four months ago — long before its latest public relations woes. But, coincidence or not, the program usefully allies Goldman with Mr. Buffett, a man whose reputation as one of America’s wisest and most straightforward investors remains intact, and who rode to Goldman’s rescue last year in the darkest days of the financial crisis with billions of dollars of new investment.
In an interview, Mr. Buffett said he was approached by Goldman to take part in the effort “last month or so.” He said he was not committing any money of his own but would provide “advice from the 35,000-foot level.”
“I would not be doing this if I didn’t think there was going to be a significant net benefit to small-business owners in this country,” Mr. Buffett said, adding that he was not disturbed by Goldman’s image problems and defended its hefty profits. “They are making a lot of money now,” he said. “I am all for it and this program is a beneficiary.”
Under the plan, Goldman will provide $200 million to pay for small-business owners to get business and management education at local community colleges and other places — the first program will be at La Guardia Community College in Queens, New York.
The plan will also provide mentoring and networking services. Goldman said it had a long line of its own staff willing to take part.
And in a third prong of the program, Goldman is giving $300 million in loans and grants to small businesses. Some of the $500 million will come from $400 million in its foundation.
