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News : International Last Updated: Jul 19, 2010 - 9:35:04 AM


Monday Newspaper Review - Irish Business News and International Stories - - July 19, 2010
By Finfacts Team
Jul 19, 2010 - 8:20:38 AM

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The Irish Independent reports that potential bidders for Quinn Insurance have been sent a so-called "teaser'' report about the company designed to attract their interest before the full sales process begins.

The seven-page document is not a full sales memorandum and doesn't contain the kind of sensitive information expected to be divulged later on. Interested parties that get the teaser document must put forward a case as to why they should be allowed to progress to the next stage.

The document contains details on the past five years of Quinn trading, pointing out that it only moved into the red in the past two years. It also includes details on market share in the Irish and UK insurance industries. The appointment and recent work done by the administrators Grant Thornton is also referred to. The sale is being handled by Macquarie and, contrary to some media reports, only four or five bidders are expected to make it on to the final shortlist. Much of the early interest in the company has been described as highly speculative.

Anglo Irish Bank is also interested in taking over the insurance company, albeit with an insurance joint venture partner. The full information memorandum will be issued on July 28 to those parties Macquarie are satisfied are genuine. The sale is being handled by Macquarie staff operating out of London.

Since taking over the company earlier this year, Grant Thornton has managed to move Quinn Insurance back toward profitability, at least on a week-by-week basis.

Profit

The UK business recently moved into profit on a week-by-week (or run-rate) basis for the first time this year.

On average, the company's UK motor insurance business has implemented price increases of 25pc, helping the UK business to stage a recovery, even though the volume of business has dropped.

Quinn Insurance lost about €49m in 2008 and is expected to register losses of about €50m for 2009. The 2009 results were recently submitted to Financial Regulator Matthew Elderfield.

However, improving the 2010 performance has been the key objective of the administration team, led by Michael McAteer and Paul McCann of Grant Thornton.

The problems earlier this year, when the company was placed in administration, are likely to prevent 2010 being profitable in its entirety, but the administrators are confident losses are now stopping and the changed performance will attract suitors to the company, which is still owned by Sean Quinn and his family.

The company will have to take a €10m charge in 2010 to cover redundancy costs.

The firm is also likely to up its advertising spending and try to gain a stronger foothold in the Dublin insurance market, which is its weakness. Whoever buys the company will have to pump in capital to boost its solvency levels, as demanded by the regulator.

The Irish Independent also reports that jet-setting former Taoiseach Bertie Ahern cost the taxpayer €14,000 in VIP airport charges and mobile phone bills since standing down.

Between his resignation in 2008 and May of this year, Mr Ahern ran up a €5,682 bill for VIP airport facilities and a mobile phone bill of €8,331.

All former Taoisigh are entitled to have their mobile phone and airport costs paid for by the State.

However, the amount claimed by Mr Ahern is the largest of any former Taoiseach, according to figures obtained by the Irish Independent.

This was on top of his wage and expenses as a sitting TD, income from his column in a British Sunday newspaper, and lucrative speaking engagements abroad.

Last year he earned around €467,200 from his speaking arrangements alone. He is registered with the Washington Speakers Bureau which charged $40,000 (€29,200) per speech -- and he gave 16 speeches last year. He also enjoys a €92,672 TD's salary.

Albert Reynolds, who served as Taoiseach in two coalition governments between 1992 and 1994, was the second highest claimant, with an overall bill of €5,446 during the three-year period.

John Bruton, who served as Taoiseach during the 1994 -1997 Labour, Fine Gael and Democratic Left coalition, claimed €3,477 in mobile phone charges, but had no airport costs.

Garret FitzGerald, who headed two Fine Gael-Labour coalitions between 1981 and 1987, claimed a total of €1,730.

Liam Cosgrave, who headed the Fine Gael-Labour coalition from 1973 to 1977, did not claim any funds under the arrangement.

Former Taoisigh are entitled to a chauffeur-driven car, garda protection and secretarial assistants.

Chauffeur

It emerged recently that the cost of providing chauffeur-driven cars to four ex-Taoisigh came to €684,247 last year.

And Mr Ahern again ran up the biggest bill for fuel and maintenance costs at €13,040.

Mr Ahern resigned as Taoiseach and leader of Fianna Fail at the height of the controversy over contradictions in evidence to the Mahon Tribunal about bank lodgments made in the 1990s when he was Finance Minister. Following his resignation he enjoyed a ministerial pension on top of his €92,672 TD salary.

However, in April of this year he surrendered this €83,426 pension following uproar over sitting politicians drawing a pension while being paid a TD wage.

During 2009, Mr Ahern travelled extensively to promote his autobiography, and to speak abroad. He could not be contacted yesterday for comment.

Last night, Labour TD Roisin Shortall insisted it was time to review the arrangement for former Taoisigh.

"It is time such expenses were brought into line with the realities of life. It is annoying for taxpayers struggling to get by," she said. "We see that Bertie Ahern is currently travelling around the world and has a considerable income from speaking arrangements."

"There is no justification for the taxpayer footing the bill when he is a sitting TD and has an income on the side."

The Government has no plans to change the arrangement of paying for VIP airport charges and mobile phones for former Taoisigh.

The Irish Times reports that ministers will meet on Wednesday to begin discussions on how to deliver €3 billion in cuts in December’s budget.

Ahead of the meeting, Minister for Finance Brian Lenihan has strongly signalled that a property tax will not form part of the budget. “One of the problems with capital taxation at present . . . is that we’ve seen this huge reduction in the value of property so that the capacity of the capital taxes to raise money has reduced accordingly,” he said.

“It’s very difficult if you’re talking about capital taxes in the present climate to talk about property taxes because that’s just another capital tax,” he added.

At the all-day meeting at Farmleigh House in Dublin, the Cabinet will also finalise a €40 billion five-year capital spending programme, to be announced later this week.

A confidential budget strategy memo, setting out the preliminary outline of the Government’s initial approach to formulating December’s budget, has yet to go to Government but will be discussed on Wednesday.

All departments have submitted proposals for various cuts to the Department of Finance ahead of the meeting, which will be the first official budget discussion involving all departments.

Government sources would not confirm reports a general cut of 5 per cent in all current spending would be required in all departments. “The focus of the Cabinet meeting will be jobs,” a Government spokesman said.

The big-spending departments of Social Protection, Education and Skills and Health and Children are expected to face the largest cuts.

Government sources said spending was likely to be protected in the Department of Enterprise, Trade and Innovation in an attempt to prioritise spending on job creation and enterprise initiatives. “In a recession it would be counter-intuitive to do otherwise,” one source said.

Green Party chairman Senator Dan Boyle said his party’s contribution to budgetary preparations would not be confined to the Department of the Environment and the Department of Communications, Energy and Natural Resources – the two portfolios held by Green Ministers. “Things we’d be most concerned about would be maintaining social welfare rates and education expenditure. Also on the capital side our priority would be infrastructure relating to public transport and water services,” Mr Boyle said.

Wednesday’s meeting will be the second-last Cabinet meeting before September. The final meeting has been provisionally scheduled for Wednesday 28th.

Mr Lenihan’s latest comments on the prospect of a property tax came in a radio interview.

Speculation that a property tax could be imminent intensified last week after the publication of an International Monetary Fund (IMF) report showing the Department of Finance told visiting IMF officials in May a flat-rate property tax was under consideration.

A Department of Finance spokesman said last night nothing had been ruled out. “All taxation proposals are considered within the context of December’s budget,” he said.

Mr Cowen will launch the capital spending programme towards the end of the week, either on Thursday or Friday. The announcement will reveal the overall financial allocation for each department for the years 2011-2016 and the total envelope is expected to be in the region of €40 billion.

While some transport projects are expected to be among those previously-announced infrastructure initiatives to be dropped, Metro and Luas projects are understood to be safe as they will be particularly labour-intensive. Some projects are expected to be “notable by their absence”, according to a Government source.

Of the €3 billion budget savings required this year, €1 billion will come from the capital programme while the remaining €2 billion will be raised through a combination of taxation and cutting current expenditure. “With €1 billion coming from a reduction in the capital programme, logically €1 billion’s worth of projects are going to fall by the wayside,” a Government source said.

The Irish Times also reports that Minister for the Environment John Gormley has rejected as “scaremongering” and “absolute nonsense” claims that the State will face massive EU fines for landfill waste if the controversial Poolbeg incinerator does not go ahead.

The Minister also said he would this week receive the report of the “authorised officer” he appointed in March to examine the contract between Dublin City Council and a consortium to build the €350 million incinerator.

Senior counsel and accountant John Hennessy was appointed to carry out an independent examination of the Poolbeg contract, including an examination of its financial implications in Dublin.

His remit included assessment of the financial risks should Dublin City Council and the three other Dublin local authorities be unable to meet the volumes of waste committed to in the “put-or-pay” clause of the contract, which requires the council to provide 320,000 tonnes of residual waste every year. The report may also look at the issue of compensation should the Poolbeg project be repudiated or scaled down.

As the war of words continued in the wake of the Minister’s publication last week of a draft waste policy plan which would make large incinerators such as Poolbeg unviable, Mr Gormley insisted Ireland was compliant with EU directives.

He said there was a “co-ordinated campaign saying we’re going to be facing fines. That’s absolutely untrue. It’s scaremongering. I would never allow anything like that to happen as Minister. I’ve been probably the most vigilant Minister in trying to deal with EU directives. I’ve made sure that the waste hierarchy is the thing that we abide by.”

He insisted Ireland would meet its waste management targets for 2010, and said the proponents of the Poolbeg incinerator “want the Minister to come in on his white steed and say ‘oh don’t worry, I’m going to make things nice for you’. Well, I’m not.”

Mr Gormley added: “I’m going ahead with my policy. I will be introducing the levy system.”

Ireland has “the lowest landfill prices in Europe. We have to have a landfill levy because we have to abide by the landfill directive.”

The Minister believed the “path we are pursuing is by far and away the most sustainable path in terms of waste management”. The local authorities “don’t want it because it conflicts totally with their ambition to construct a 600,000 tonnes incinerator”.

He said: “They cannot feed the beast at the moment. It’s just too big. They know that. The only way they can do that is by controlling the waste. They can’t do that in light of the McKechnie judgment.”

The High Court ruled in December 2009 that the council had abused its dominant position in the Dublin waste market by adopting a variation of its 1998 waste management plan, decreeing that waste would only be collected by the four local authorities or their chosen contractors.

Mr Gormley said the authorities wanted him to introduce legislation to reverse the McKechnie judgment. “I’m saying to you absolutely that I’m not going to do it.”

The local authorities, he added, “don’t control the waste”.

The Irish Examiner reports that company bad debt hit €1.2 billion in the first six months of 2010, with the 32 worst-affected liquidated firms owing €770 million between them.

New figures compiled by www.vision-net.ie show that the ongoing financial crisis is having a crippling impact on payments to creditors across the business spectrum.

An online survey by the group over the past six months indicates that liquidated Irish companies now owe a fortune in bad debt because they either cannot afford to pay back creditors or are still waiting on re-payments from other firms themselves.

Some 32 companies owe a massive €770m between them.

And with liquidity problems continuing to damage a host of industries, there appears to be no immediate end to the crisis.

According to the figures, 3.8% of liquidated companies surveyed each owe more than €5m, including 32 companies with bad debt of €770m.

A further 18.5% of firms questioned by www.vision-net.ie owe between €1m and €5m, while 14.6% are responsible for individual bad debt ranging between €500,000 and €1m.

Just over half of all liquidated companies surveyed — 50.7% — owe less than €500,000.

The figures are likely to further increase over the coming months as the financial crisis further impacts on Irish businesses.

Last week, liquidators were been appointed 25 companies, including:n12 in Dublin

* Two in Galway

* Two in Kildare

* One each in Cork, Carlow, Cavan, Donegal, Laois, Louth, Meath, Waterford and Wexford

The businesses affected were in the food, security, furniture, mechanics and finance sectors.

A further five companies have had receivers appointed to them in the past seven days, including two in Dublin and one each in Clare, Donegal and Wicklow.

According to statistics revealed by www.insolvencyjournal.ie earlier this month, Irish insolvencies were 27% higher during the first six months of 2010 compared with the same period last year.

Between January 1 and July 1, a total of 792 companies were declared insolvent — 170 businesses more than the 622 in the first half of 2009 and already more than the 773 insolvencies recorded during the whole of 2008.

Dublin has been the worst-hit location for firms going bust, with its 322 insolvencies in the first six months of 2010 accounting for 40% of all cases.

Besides a paid subscription , the Financial Times provides the following options:

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Editor's Picks:

German industrialists attack Chinese  - - Chief executives complain about business climate to Wen Jiabao; Jürgen Hambrecht, chief executive of BASF, the chemical producer, hit out at restrictions on foreign business and complained of foreign companies being forced to transfer business and technological know-how to Chinese companies in exchange for market access.

Containment cap working well, say BP - - Leak could be shut off next month; Pressure in the well has risen slowly since the cap was put on last week, to 6,778 pounds per square inch. The rise, at a rate of about 2 psi per hour, was slower than anticipated but Mr Suttles said it was consistent with depletion of the well after almost three months of unconstrained flow.

Mercedes-Benz steers at India  -- Strong demand expected over next 10 years.

Young Chinese workers on strike -- Waves of protests throw the spotlight on the exploitation of migrants; “China is basically controlled by the capitalists. All I can do at the moment is speak up for the workers,” says Qing, meeting up with FT Weekend in a café in Shenzhen. “It seems that the government chooses not to see certain things, so we must keep shouting complaints into their ears non-stop. Only after they hear us will they start seeing.”

IMF seeks $250bn boost to lending resources - - Fund aims to raise ‘firepower’ to prevent crises.

Americans lose faith in recovery  -- Majority feel worse off than a year; The AlixPartners survey was conducted at the end of May, finding that 71 per cent of Americans either feel that their economic situation is “the same”, “somewhat worse”, or “a lot worse” than a year earlier, when the US economy was contracting and shedding several hundred thousand private sector jobs per month.

Greece makes 'strong start' on reforms - - Greece wins praise from the International Monetary Fund for a strong start to its three-year programme of fiscal and structural reforms but analysts are sceptical about whether the country can avoid a sovereign debt restructuring.

IMF and EU defer talks with Hungary - - The International Monetary Fund and European Union have postponed the conclusion of a budgetary review in Budapest, insisting that the government must rethink its proposals.

America’s sensible stance on recovery - - The combination of measures proposed offers the best prospect for moving the economy forward, writes Lawrence Summers, President Obama's top economic adviser.

Why the battle is joined over tightening  - - To tighten or not to tighten – that is the question. This is the issue addressed in Martin Wolf's forum in the FT this week.

Access to the New York Times is currently free. If you are not registered, click here

Editor's picks:

Obama Gains Evangelical Allies on Immigration - - President Obama is picking up some unlikely supporters among evangelical leaders who support an overhaul that would include a path to legalization for illegal immigrants.

BP Hopes to Keep Gulf Well Closed, but Seeping Is Detected - - BP said that it hoped to leave its well in the Gulf of Mexico closed down until it is permanently plugged, but federal officials warned of a potential seep on the sea floor near the well; If BP succeeds in keeping the cap atop the well closed until a relief well is finished, that would mean the gusher would effectively be over, three months — and tens of millions of gallons of oil — after it began. It would be a major turnaround after weeks of failure for the oil giant, which had been harshly criticized as being unprepared for such a disaster.

After Job Training, Still Scrambling for a Job  - - Hundreds of thousands of Americans enrolled in federally financed training programs, only to remain out of work; For six weeks, Mr. Valle, 49, absorbed instruction in spreadsheets and word processing. He tinkered with his résumé. But the interviews his caseworker eventually arranged were for low-wage jobs, and they were mobbed by desperate applicants. More than a year later, Mr. Valle remains among the record 6.8 million Americans who have been officially jobless for six months or longer. He recently applied for welfare benefits.

“Training was fruitless,” he said. “I’m not seeing the benefits. Training for what? No one’s hiring.”

The Pundit Delusion - - Paul Krugman says instead of focusing on how its policies play in the news, the Obama administration should be worrying about their actual effect on the economy; But the only real puzzle here is the persistence of the pundit delusion, the belief that the stuff of daily political reporting — who won the news cycle, who had the snappiest comeback — actually matters.

This delusion is, of course, most prevalent among pundits themselves, but it’s also widespread among political operatives. And I’d argue that susceptibility to the pundit delusion is part of the Obama administration’s problem.

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In a Partnership of Unequals, a Start-Up Suffers - - A start-up struck a deal with another company. The acrimonious breakup four months later is a lesson in keeping tabs on who did the innovating;The start-up, Infoflows, began working with Corbis, the big photo library and licensing company owned by Bill Gates, Microsoft’s chairman, and in June 2006, the two signed a multimillion-dollar development agreement. But four months later, things fell apart, culminating in a Washington State jury verdict against Corbis for misappropriation of trade secrets, fraud and breach of contract. The jury awarded damages of more than $20 million.

 


© Copyright 2010 by Finfacts.com

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