The Irish Independent reports that ACC Bank will this morning ask the High Court to wind up three insolvent companies in the Fleming building group, which has debts of more than €1bn.

It follows a decision yesterday by the five-judge Supreme Court to unanimously refuse protection for the companies, which had fought a lengthy legal battle to rescue the group. The court said the facts of the high-profile case were "bleak" and epitomised "the consequences of the recent property boom and bust" which had left many people in "dismal situations".

Last night insolvency experts said that the ruling, which follows the rejection on two occasions of developer Liam Carroll's bid for court protection for his Zoe Group, had "placed the final nail in the coffin" for insolvent construction companies seeking court protection from their creditors. The Supreme Court found the proposed survival schemes for John J Fleming Construction (JJFC), JJ Fleming Holdings (JJFH) and Tivway Ltd did not amount to a plan with a reasonable prospect for their survival as "going concerns".

The schemes were instead a "holding plan" involving the sale of the profitable "engine" or construction arm of the group to a new company outside the examinership, leaving behind an impaired property development business, Ms Justice Susan Denham said. The plan was to keep sites in a land bank for 10 years in the "hope" the property market would improve by then and the banks would support a build-out programme at an appropriate time in the future, she said. An examinership was "not a process for sale", said Judge Denham.

Some 137 people are employed by JJFC but, even if the schemes had been approved, all but 15 of those jobs were to go to companies outside the survival scheme, she added.

The judge also noted both JJFC and JJFH were unlimited companies whose shareholders, John and Noreen Fleming, had transferred €3m of their assets to trust funds in May 2009 and also pledged some €5m to the proposed survival schemes.

Guarantees

ACC had said the guarantees of Mr and Mrs Fleming in the two unlimited companies were significant to it and approval of the schemes would deprive it of that "route" to the Flemings.

Ms Justice Denham was giving the court's judgment allowing the appeal by ACC against a High Court decision last November approving the schemes which ACC, owed €22m by Tivway, had described as "asset stripping" and a "personalised NAMA".

The Fleming group has total debts of some €1bn, including €260m to Anglo Irish Bank and liabilities to AIB, Bank of Scotland Ireland and hundreds of unsecured creditors. All but ACC supported the schemes.

The Irish Independent also reports Anglo Irish Bank must be kept alive to help the National Asset Management Agency and other banks sort through the mess left behind since the property bubble burst, one of its directors, former finance minister Alan Dukes, said yesterday.

The bank, which is seeking around €6bn from the State, should be merged with other medium-sized banks to create the so-called third force in Irish banking, he said.

This could then lend to business and provide expert knowledge, according to Mr Dukes, who is the public-interest representative on Anglo's board.

"As we get out of the property bind that we're in, we are going to need financial operators who can handle the sort of restructuring and repackaging of all that property debt that's going to be out there," Mr Dukes told RTE presenter Pat Kenny yesterday.

Anglo has asked the European Commission for permission to become a specialist business bank after dividing the bank into a "good bank" and a "bad bank".

That plan is expected to be approved or rejected over the summer.

Mr Dukes, who supports the Government's NAMA plan, has said it has been slow to get off the ground.

He acknowledged: "It is slow and that has been a big problem. That has been for some good reasons and some not-so-good reasons."

Mr Dukes added that Anglo had bought back subordinated debt at less than 50pc of its face value. He declined to be more detailed, saying that it was "rather confidential".

All the major banks have bought back so-called subordinated debt over the past 12 months.

Investors holding subordinated debt to not have the same rights to a bank's capital as senior bond holders or depositors.

The Irish Times reports that the State's largest bank, Allied Irish Banks (AIB), climbed 20 per cent on the stock market, its biggest gain since September, after investors reacted favourably to its plan to sell businesses which would generate cash to help absorb mounting losses.

The bank has been presenting its capital-raising plan to investors in London over the past two days after saying this week that it could raise up to €4 billion by its own means and avoid a further Government bailout.

The bank’s shares climbed 20 cent to €1.25 as global institutional investors warmed to the bank’s plan which involves selling some of the bank’s most valuable assets.

The rising share price also lifted Bank of Ireland which increased 9.1 per cent, or 9 cent, to €1.09.

AIB will be left with a capital hole of more than €4 billion after selling €23 billion in development loans at a discounted price to the National Asset Management Agency (Nama).

The bank said that it could raise capital by selling key businesses, which include its UK banking business, Polish lender Bank Zachodni WBK, and its interest in US bank MT, before having to turn to shareholders for cash.

Analysts estimate that AIB could net about €2.5 billion from the sale of its Polish and US businesses.

Colm Doherty, managing director of AIB, said this week that it has had discussions with a number of investors who were interested in taking a “strategic” stake in the bank. He said that there were an “inordinate” number of parties interested in AIB’s Polish business, which he described as “the jewel in the crown”.

The bank reported losses of €2.6 billion for 2009 earlier this week – the first annual loss in its history.

AIB has said that it plans to raise capital through “self-help” options before turning to investors or even the Government for cash.

The positive reaction from the international investment community improves the bank’s prospects of tapping these investors for cash through the issuing of new shares after the sale of its businesses.

“They are getting a positive reaction to the ‘self-help’ programme, even if it means selling prized assets,” said banking analyst Sebastian Orsi at Dublin stockbroking firm Merrion Capital.

The share price values AIB at just over €1 billion. Further gains on the market will improve the bank’s chances of raising sufficient capital from a “rights issue” cash call of shareholders. Investors were said to be particularly encouraged by the potential sale of AIB’s UK business in private presentations given by Mr Doherty over the past two days.

The sale of the business, which has a well-established commercial banking operation, could generate €650 million in a capital gain for AIB, according to analysts at French bank Société Générale.

AIB’s plan to swap debt with bondholders for an estimated gain of up to €350 million will be made within days, sources said.

Meanwhile, Anglo Irish Bank director Alan Dukes said the bank may become part of “a third force” banking group to rival AIB and Bank of Ireland formed out of the smaller financial institutions.

The Irish Times also reports that retail banking faces another tough year, with Irish institutions paying more for their money than they are charging customers

Allied Irish Banks managing director Colm Doherty made a bold but refreshingly honest statement for a banker at AIB’s annual results when he said that only three players in the market were actually lending on mortgages and all three were domestic banks.

“None of the foreign banks are lending, they have priced themselves out of the market,” he said on Tuesday.

The lenders he was referring to are his own bank; Bank of Ireland, which is claiming in adverts to be approving 100 new mortgages a day, and EBS Building Society, which is writing more than double its usual share of new mortgages.

The lack of competition does not bode well for consumers.

Permanent TSB, once the leader in the mortgage market, said this week that the bank provided €800 million in lending in 2009, with just €300 million of this on new mortgages. The rest was top-ups to existing customers.

This compares with €8 billion in new mortgage loans in one year at the peak of the property boom.

Doherty said AIB was now covering 40 per cent of new mortgages, well above its traditional 17 per cent share of the market.

Doherty said that retail banking was “dysfunctional”, with Irish institutions paying more for their money than they are charging customers. The consequent squeeze on the net interest margin cost the bank €420 million last year.

It’s little wonder then that Lloyds Banking Group and French bank Paribas have abandoned Irish retail banking with the respective closures of their Halifax and Postbank businesses.

The increased cost of customer deposits shaved 0.42 per cent off the net interest margin, which was only partially offset by a 0.18 per cent gain on high lending margins.

Despite this AIB is still lending, though Doherty said that the bank’s standard variable rate would rise by a half point over “the next couple of months” to the same level offered by many peers.

As the State’s largest bank moves, other lenders will follow to where Permanent TSB was forced to much earlier due to its heavy reliance on outside funding.

The difficulty for AIB is not just the charges it makes on future loans but with the bank’s €27.8 billion Irish mortgage book.

Doherty said that 60 per cent of these mortgages were on tracker rates. Most are likely to be on lossmaking margins above the European Central Bank rate.

Resolving this will take some time – possibly as long as the duration of the loans – given that many customers have very favourable rates and will be reluctant to move in the short term when they are enjoying margins as low as 0.6 per cent above the ECB rate.

The scale of the problem explains why AIB said this week that it will no longer take switcher mortgages to focus on first-time buyers and home movers. Mortgages are bad business in Ireland.

Doherty pointed out that he did not see any value for the economy in facilitating switchers as the bank’s “primary emphasis is on support property transactions and thus the broader property market”.

Doherty didn’t hold back when assigning blame for the problems with retail banking and the heavy concentration in land and development which is costing AIB so dearly and “imperilled” the bank.

As a former head of the capital markets division of the bank in the IFSC on the northside of the river, he pointed to the problems at the retail bank at AIB Bankcentre on the southside in Ballsbridge.

The bank had operated as “a siloed business” adopting different credit and risk standards across the bank which had led to the problems in the over-exposure to developers and land speculators.

Doherty defended his track record as a director, saying that he had raised his concerns at board meetings about the retail bank. “My views are well-known at the board in relation to the concentration of risks that were built up in the retail portfolio,” he said.

If Doherty pointed out the problems with retail banking on Tuesday, Irish Life & Permanent (IL&P) confirmed them the following day with its 2009 results.

Permanent TSB, a mortgage lender, posted an operating loss of €270 million after writing off €376 million on bad loans. IL&P finance director David McCarthy said the net interest income fell 21 per cent to €375 million as higher deposit rates and increase funding costs squeezed the net interest margin.

It’s all about funding at IL&P this year as well as raising up to €600 million as a dowry to recapitalise Permanent TSB before marrying it off into any unions that arise from the expected consolidation across the banking sector.

While awaiting the future shape of the sector following the loan transfers to the National Asset Management Agency (Nama), IL&P must try at least to fix Permanent TSB’s operating model.

The mountain it must climb is the €3.5 billion in funding that matures before the blanket guarantee ends in September.

The extended Government guarantee scheme will cost the bank up to €130 million this year, almost five times the blanket guarantee cost the company last year, so this, coupled with higher deposit rates will continue to eat into operating profits before loan loss charges.

Kevin Murphy, chief executive of IL&P, said he expected banks to stop paying up for deposits once Nama injected liquidity and improved bank funding generally.

Michael Cummins, a director at Dublin firm Glas Securities, which specialises in fixed-income markets, said that life will remain difficult in Irish retail banking “until confidence is fully restored in the Irish banks and the marketplace”.

“The cost of the new Government guarantee, significantly higher costs of funding outside the guarantee and increased competition for deposits will weigh negatively on earnings in 2010.”

Retail banking in Ireland faces another tough year as the Nama transfers have yet to begin and as a result it will be some time before the banks’ capital requirements are crystallised. Until then, high-street banking will remain tricky.

The Irish Examiner reports that the future of one of the country’s largest building groups is under threat following the decision by the Supreme Court to reject a restructuring plan.

The decision by the five judges will result in the loss of more than 100 jobs at the Cork-based Fleming Construction Group.

It comes on foot of an appeal taken last year by Dutch-owned ACC Bank against the High Court’s ruling in relation to John J Fleming Construction, JJ Fleming Holdings and Tivway. They collectively have debts of over €1 billion, including €260 million owed to Anglo Irish Bank. A statement issued on behalf of Mr Fleming said he was very disappointed. He said despite a huge effort from all involved in the company, including staff and creditors, the actions of ACC Bank in opposing the restructuring plan would result in job losses.

Mr Fleming said he wished to thank all of his staff, suppliers and all those who have dealt with his company. He said many of them came from the west Cork region and had worked loyally and dedicatedly with him over the last 35 years. He said everything had been done to save the company and protect as many jobs as possible.

ACC Bank, which triggered Fleming’s loss of court protection, was owed ‘just’ €22m, and started lending to Fleming about two years ago. Fleming’s three other banks (AIB, Bank of Scotland, and Anglo Irish Bank), and hundreds of other creditors, all had supported the High Court approved rescue plan agreed in November.

The 35-year-old widely diversified construction group employed up to 500 people, and up to 300 in Cork, and Mr Fleming’s personal vision in building and promoting the West Cork Business and Technology Park at Clonakilty has been a solid base there for over 1,000 jobs. By this week, the numbers in Flemings construction wing were put at just 137.

Local politicians and community leaders expressed concern at yesterday’s ruling. Former Fianna Fáil minister Joe Walsh paid tribute to Mr Fleming and said the decision was a major blow to west Cork.

Fine Gael councillor John O’Sullivan, from Courtmacsherry, also expressed dismay at the Supreme Court decision. "It is a great disappointment for the workers and locality in general," he said, lamenting what he described as the major human dimension to the ruling.

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The New York Times reports that the House of Representatives on Thursday approved a $15 billion measure intended to spur job creation by granting tax breaks to businesses that hire workers, as Democrats, bracing for new jobless figures, tried to show that Congress was doing something about stubborn unemployment.

Democrats pushed through the measure on a mainly party-line vote of 217 to 201. They characterized the measure, which also funneled an extra $20 billion into road and bridge construction, as just the first step in a broad legislative push to bolster the economy and encourage hiring.

Representative Bob Etheridge, Democrat of North Carolina, said the bill was “really all about our three most important priorities in this Congress: jobs, jobs, jobs.” He estimated that the measure could create one million jobs.

Though the measure attracted bipartisan support when approved by the Senate last week, House Republicans were dismissive, saying it was cobbled together by Democrats for political purposes and would do little to spur new employment. And many Democrats, even though they backed the measure, considered it far too limited in scope.

Just 6 Republicans joined 211 Democrats in backing the measure; 166 Republicans and 35 Democrats were opposed.

“This is a no-jobs bill, this is a faux-jobs bill, this is a snow-jobs bill,” Representative Steven C. LaTourette, Republican of Ohio, said.

Democrats in the House and Senate are eager to score some victories on job-related legislation even as they continue to be preoccupied with the fate of their health care overhaul. The bill passed by the House, which also extends the federal highway program and provides federal subsidies for public works bonds, was scaled back from a much larger measure in the Senate in an effort to speed it through.

But even advancing the narrower measure has vexed Democrats. Senate Democrats had hoped the House would simply pass its measure so it would land on President Obama’s desk before a new jobless report on Friday.

But House Democrats wanted several changes. They adjusted the bill to cover its costs more completely, to satisfy Democratic fiscal hawks. To attract liberal lawmakers who contended the measure was too meager, they added a provision to generate business for minority contractors. The revisions mean the measure will have to be reconsidered by the Senate, where it was unclear whether Republicans would seek to slow its progress.

The centerpiece of the legislation is a plan to exempt businesses that hire people who have been out of work for at least 60 days from paying the 6.2 percent payroll tax on those employees through year-end. It also grants a $1,000 tax credit if the workers are kept on for a full year.

Opinion is divided on whether the approach is effective or simply gives businesses a break on workers they would have hired anyway. But lawmakers said that given the dismal unemployment picture, they were willing to give it a try, and estimated the tax breaks would put 300,000 people to work.

That was not enough for some Democrats. “We should stop calling it a jobs bill, and instead acknowledge this is about business tax cuts,” said Representative Barbara Lee, a California Democrat and chairwoman of the Congressional Black Caucus. She voted against the bill and said much more needed to be done to reach the chronically unemployed.

In bolstering and extending the federal highway fund through the end of the year, lawmakers hoped to encourage state and local governments to move ahead with projects that provide good-paying jobs and bring some stability to a federal program that was shut down temporarily this week in a Senate fight over unemployment benefits.

“It will save hundreds of thousands of jobs,” said Representative Earl Blumenauer, Democrat of Oregon, about the transportation financing. “It will incite economic activity.”

House members were upset over a Senate transportation provision that they said funneled too much money to California, Louisiana, Washington and Illinois; they extracted a promise from Senator Harry Reid of Nevada, the majority leader, to correct the allocation in a later bill.

Democrats had intended to focus on job-creating measures this year but that plan has been disrupted by the continuing fight over the health care overhaul.

As the health negotiations continue, the Senate is moving forward on a $150 billion package of business tax breaks and safety net programs that it hopes to approve next week. Democrats say they will next turn to providing more help for small businesses and aid to states.