The Irish Independent reports that the Department of Finance last night admitted it does not
know how much the Anglo Irish Bank bailout will cost,
despite promises by Finance Minister Brian Lenihan that the
bill would not run to more than €23bn.
As critics raised the spectre of a black hole swallowing
billions more in taxpayers' cash, the European Commission
gave the Government permission to plough another €10bn into
the embattled bank -- on top of the €14bn already approved. But the department yesterday admitted there was a
"significant risk" the Anglo bill might rise even further. Industry sources suggested that Anglo could need another
€2.5bn, depending on the discount the State's bad bank NAMA
applies to the troubled Anglo loans it takes on later in the
The fresh admission comes just weeks after Mr Lenihan
insisted he was "confident" the cost of saving Anglo and
Irish Nationwide would be no more than "€23bn to €25bn".
Opposition politicians have slammed the cost of the
bailout, saying the money would end up in a black hole and
never be seen again.
Sources last night said the ultimate cost of Anglo's
bailout would not be known until the nationalised bank has
transferred all €36bn of loans earmarked for NAMA.
The first €9bn was transferred at a discount of 55pc
earlier in the summer, but the discount rate for the
remaining €27bn will not be known for several months.
"If the discount rate rises to 65pc, you could be talking
about Anglo needing another €2.5bn," one source said.
In its statement, the Department of Finance admitted
there was "considerable uncertainty" around the discounts
that would be applied to the rest of Anglo's NAMA transfers.
The loss Anglo may take on the rest of its loan book is
listed as another "uncertainty", as well as the outcome of
the European Commission's decision on Anglo's restructuring
"Because of the uncertainty facing the bank, there is a
significant risk that further capital will be required by it
in the future," the department said.
News of further capital demands came after the Government
was given EU permission to put another €10bn into Anglo --
higher than the €8.6bn mooted in March.
In granting approval for the latest €10bn of support, the
commission's vice president for competition, Joaquin Almunia,
stressed that Anglo would have to "restructure profoundly"
and tackle the "weaknesses of the past business model".
The commission is weighing up Anglo's restructuring plans
and is expected to give a decision in September.
"They seem to be saying that if the commission doesn't
feel that Anglo's plan is feasible and completely changes
the way that the bank does its business then they (the
commission) aren't going to say yes,"
one source said.
The department attributed the need for yesterday's extra
€1.4bn to a technical accounting issue.
Officials said that when Anglo passes its loans over to
Nama it gets bonds in return that are essentially IOUs from
the State. Anglo expects to hold these IOUs for between five
and 10 years.
As the IOUs won't be paid out immediately, Anglo will
value them at less than their face value, so every €10m of
IOUs might only be worth €8m in the bank's accounts.
That difference between the face value and the holding
value could leave Anglo short of capital, so the State has
asked for permission to pump in another €1.4bn to plug that
"(The extra €1.4bn) is to cater for that uncertainty and
to eliminate the need for a further state aid application to
the EU Commission should any capital need eventually arise,"
the department stressed.
Fine Gael enterprise spokesman Richard Bruton expressed
outrage at the extra €1.4bn, demanding that NAMA stops
accepting loans from the zombie bank.
"It is intolerable that scarce taxpayers' money is being
continuously poured into a bank that will never lend a red
cent to business and will form no part of Ireland's economic
recovery," Mr Bruton said.
"It is now critical that NAMA ceases purchasing loans
from Anglo, because as the losses on these loans crystallise
the need to pour more capital into the bank arises, merely
adding to the problem and tightening the noose around the
already overburdened taxpayers' necks.
"As was stated by Anglo chief executive Mike Aynsley, the
'lion's share' of the money being put into Anglo would
'never be seen again' and it would 'end up in a black hole'.
That represents a depressing reality for the taxpayer, who
is being subjected to increased energy charges, multiple
levies and a Government that has no jobs plan," he said.
Labour's finance spokeswoman Joan Burton said Anglo had
become the "hole that keeps on growing".
"It's taxpayers who are on the hook for these vast sums
of money," she stressed. "It's a bottomless pit that keeps
getting deeper. These are just vast sums of money and an
honest and independent assessment of the bank is urgently
The Irish Independent also reports that the interest rate on new government borrowing is again
higher than it was 12 months ago, as the gains from the
recent stress testing of EU banks evaporate.
The yield that investors demand for lending to Ireland for
10 years rose a further 0.19pc (19 basis points) to more
than 5.2pc yesterday.
This is 30 basis points more than the same day in 2009,
and six basis points above the level six months ago. The
difference between the yield on German government bonds was
the highest for two weeks.
The new rise came as the National Treasury Management
Agency, which handles the national debt, announced that it
would raise fresh borrowing next week through the auction of
bonds repayable in 2014 and 2020.
The amount will be announced on Friday but is likely to
be the typical €1.5bn monthly auction.
There seems little doubt that the money will be raised,
however, there will be disappointment that the recent falls
in yields have not been sustained.
The Irish 10-year yield fell below 5pc after the two big
Irish banks passed the EU stress test two week ago. There
was a general fall in yields in peripheral euro countries
after figures about banks' holding of government debt were
Spain saw the biggest fall, but rates are also rising
there. Yesterday, 10-year Spanish government debt was
yielding a quarter percentage point higher than a year ago.
"There have been some bad headlines about Ireland's
banking sector and its fiscal outlook," said Padhraic
Garvey, head of developed markets debt strategy at ING.
"Irish bonds have held up remarkably well until now. The
market seems to be catching up on negative news, perhaps
using the upcoming bond sale as an excuse to sell."
On Monday, Standard & Poor's said it would not rule out
further credit-rating downgrades on Anglo Irish Bank.
The increase in yields came against the background of a
general rise in eurozone bonds, especially on those
repayable in 30 years. One reason was expectations that the
US Federal Reserve would signal it is ready to take steps to
support growth, which might mean more purchases of US bonds.
The moves were exacerbated by low trading volumes, said
Luca Jellinek, head of European interest-rate strategy at
Credit Agricole Corporate & Investment Bank in London.
"Plenty of scepticism remains, and fiscal retrenchment is
a long, hard slog for most peripheral countries,"
"Additionally, trading liquidity has been low. With the
summer holidays in full swing, spread volatility should
remain an issue for investors."
The Irish Times reports that pharmaceutical firm Elan has decided not to spin off its drug
delivery business Elan Drug Technologies (EDT) in the immediate
future due to concerns over its valuation.
The firm had first
looked at the possibility of hiving off EDT from its
bioneurology business back in 2008 before the credit crunch hit.
Last April Elan again said it was exploring off-loading the
business, but it indicated yesterday that current market
conditions were not conducive to getting the right price.
In 2008 it had valued EDT at about $1 billion (€750m).
According to the firm, in which Johnson Johnson took an 18.4
per cent stake for $885 million last year, although “it makes
strategic and financial sense to separate the businesses”, due
to current market conditions it has determined it will “not
start a process to pursue a separation of the EDT business at
Elan has also announced plans to restructure its debt by
retiring up to $500 million in outstanding debt due to mature in
November 2011 and November 2013 respectively through a
combination of cash on hand and the proceeds of a planned
If this proceeds as expected, Elan would reduce its gross
debt by 20 per cent, and would see its gross debt fall to about
The maturity profile of the firm’s outstanding debt would
also be extended, with no required debt repayments until
The firm would also use proceeds from its sale of a stake to
Johnson Johnson last year, as per the deal agreement, to
potentially reduce the amount of debt due in November 2013 by up
to $190 million, from $615 million to $425 million.
Restructuring the firm’s debt would also reduce annual
interest costs by between $5 million and $10 million.
Jack Gorman, analyst at Davy Stockbrokers, described Elan’s
move to extend its debt maturity profile as “no bad thing in the
Elan also confirmed its financial guidance for 2010 and
expects revenues to grow over 2009, with expenses in the range
of $475 million to $525 million, and adjusted EBITDA of more
than $150 million.
It did, however, adjust its gross cash/investments
expectation to end 2010 with cash and investments approaching
$400 million, compared to $500 million previously.
For 2011, Elan expects to be cash-flow positive, with
expenses at a similar level to this year.
Separately, the firm announced that a mid-stage trial of its
Alzheimer’s drug ELND005 failed to show “statistical
significance” but that it would nonetheless proceed with
late-stage phase III trials.
In order to fund these trials it is thought likely that Elan
and its Canadian partner Transition Therapeutics Inc (TTHI)
could be looking to bring in another partner.
Doing so would “make sense”, said Mr Gorman, given “Elan’s
balance sheet and its key skills in discovery and early
The Irish Times also reports that the McCormick Macnaughton Caterpillar dealership in the Republic
has been taken over by Canadian firm Finning, but the group’s
rental businesses have ceased trading.
Assets belonging to
three rental-related companies in the McCormick Macnaughton
group, including three premises, will be sold off at an auction
scheduled for September 4th.
Management at Finning, the world’s largest Caterpillar
dealer, took over the running of the dealership in west Dublin
on Monday, with staff training taking place over the weekend.
General manager Seán Madigan said that all 69 jobs were safe
at the moment. “We are still reviewing the business . . . We may
even look to recruit,” he said.
McCormick Macnaughton, which has been in business for more
than 60 years, had been the country’s main dealer in the
machinery brand, but ran into financial difficulty earlier this
year. As well as being appointed as the Caterpillar dealer for
the Republic, Finning has acquired assets from McCormick
Macnaughton for €2.7 million. This includes equipment and
specialist tools but not premises.
While Finning is operating from the company’s recently
completed office complex at Aerodrome Business Park, Mr Madigan
said the premises would not be the company’s long-term home.
Finning’s takeover of the Caterpillar business comes after
the company took over McCormick Macnaughton’s Northern Ireland
Caterpillar dealership last week.
Mr Madigan said the company had no interest in the McCormick
Macnaughton rental business in the Republic, but was focusing on
the construction and power generator side of the business.
The Vancouver-based company has been a Caterpillar
distributor since 1933, and has operations in western Canada,
Chile, Argentina, Bolivia, Uruguay, Britain and now Ireland.
Ulster Bank appointed a receiver to three other companies
controlled by the Macnaughton family two weeks ago in an effort
to recover debts. The three companies are two rental companies,
Mac Rental Ltd, Mac Rental Holdings and Mancasal Ltd, a property
holding company. Assets belonging to these companies, and their
operations in Dublin, Galway and Cork, will be sold at an
auction on September 4th organised by Wilson Auctioneers.
McCormick Macnaughton is owned by businessman Malcolm
Macnaughton and has been in existence for more than 60 years. It
has branches in Dublin, Cork and Lisburn. Earlier this year, the
company moved to a new head office complex at Aerodrome Business
Park at Rathcoole, off the Naas Road in Dublin, moving from its
well-known premises near the Red Cow roundabout.
The site was developed just as the property market was
beginning to decline, while the company’s core business – the
sale and rental of construction machinery – was seriously
affected by the collapse in the construction sector.
The most recent accounts filed for the company show that the
debts of McCormick Macnaughton are guaranteed by the group’s
overall company, Ballymana Holdings, which made a loss of €13
million in 2008 – compared to a profit of €7 million the
previous year, as turnover plummeted 35 per cent to €123
The Irish Examiner reports that a massive €750 million regeneration project for one of
the country’s most iconic industrial sites was unveiled last night with
the promise of up to 1,200 construction jobs.
The redevelopment of the 24-acre Marina Commercial Park (MCP) in the
heart of Cork city’s docklands is expected to create a further 5,000
jobs once completed.
It has the largest private river frontage in Cork city and has 500,000
square feet of buildings with 150 businesses on site, employing
approximately 1,500 people.
MCP director Gerry Wycherley said he wants to establish a vibrant,
socially inclusive community within the city’s south docklands, where
people will live, work and enjoy their leisure time.
"We are confident that our proposed development will provide significant
economic and employment benefit for the people of Cork into the future,"
The proposed development features:
* More than 800 apartments, providing homes for up to 2,230 people.
* A marina where they can park their boats.
* A range of community amenities.
* A visitor and science centre, the Ford Experience, which is expected
to attract up to 300,000 visitors annually.
* A new central plaza to provide a hub for the community, including a
creche and library.
City manager Joe Gavin said: "This 24-acre site is at the heart of
Cork’s docklands and the announcement is a crucial step in realising
Cork City Council’s vision for the whole docklands area."
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