The Irish Independent reports that three banks owed €113m by McInerney Homes succeeded in blocking a
restructuring plan that would have forced them to share a loss of €88m
in the High Court last night.
US investor Oaktree had been prepared to
fund the rescue plan if the debt was written off, but is now set to walk
away from the deal where banks are poised to take control.
Bank of Ireland, Anglo Irish Bank and KBC are owed €113m between them
by the company.
The three banks objected to the company's restructuring plans, saying
that they could recover more of what they were owed by taking over
McInerney's assets themselves.
The three banks were set to share just €25m under the proposal put
forward by the company.
A majority of McInerney's other, unsecured, creditors had voted to
back the plan in return for a recovery of just 7pc of what they are
McInerney is one of Ireland's biggest and longest-established
housebuilders, with operations and assets in the UK and Spain as well as
It was taken into examinership last August, with total bank debts of
€240m and net debt of €113m.
At the time of that development, McInerney blamed NAMA for its
inability to continue trading as normal.
The company said that NAMA had insisted that banks whose loans were
heading to NAMA should stop providing it with overdraft facilities.
In September, the High Court appointed Billy O'Riordan of PwC as
examiner to McInerney to allow the firm time to put together a rescue
That opportunity ended last night, when Mr Justice Frank Clarke
rejected a proposal from the examiner that would have allowed the
company to exit examinership by writing off its debts.
International investor Oaktree had agreed to pump €40m into the
company to pay off some loans and recapitalise the business.
That included the €25m to be paid over to the three banks. The banks
argued that they could recover as much as €50m by taking over the assets
Each side is understood to have backed up their claims with expert
advice, including valuation reports.
The judge did not back any particular valuation of McInerney's
property assets, but ruled that the banks should be allowed the option
of trying to recover the higher amount.
A source involved with Oaktree said the decision was
The source said the fund put a lot of effort into the McInerney
situation and was particularly disappointed that the case did not
include a cross-examination where their valuations could be defended.
However, it is understood that the US-based fund will lose little by
walking away because it did not make any investment ahead of getting the
court's blessing for the restructuring plan.
Loans that were originally made by Bank of Ireland and Anglo Irish
Bank have transferred to NAMA since the case began last August.
Details of the ruling are not due to be published until Friday, but
the scene is now set for the three banks to appoint their own receiver
to take over McInerney.
A source involved in the case said the banks would not take any
action until they had consulted with NAMA.
The Irish Independent also reports that the Irish banks tried to put €1bn of property loans through NAMA without
incurring any discount or "haircut'' after they cited an agreement they
had with Central Bank governor John Hurley.
A document seen by the
Irish Independent shows that Mr Hurley and the Financial Regulator
allowed all loans from April 2009 to escape any discount (or haircut)
and NAMA was forced to pay the full value on these loans despite its
reservations about the policy.
The key period in question was from April 2009 to November 2009 when
NAMA started valuing loans. During this period loans given out were able
to avoid any discount, even though the property market was deteriorating
rapidly at this time.
Brendan McDonagh, NAMA chief executive, wrote to the Finance Minister
Brian Lenihan in June about the issue and said there was a danger large
sums might be "irrecoverable'' as a result. The loans in question were
loans to finish off projects and "fully realise'' value from various
In May 2009, Mr Hurley and the Financial Regulator wrote to the banks
telling them NAMA would fully reimburse such loans once they were given
as part of normal banking arrangements.
However, the letter seen by the Irish Independent shows that Mr
McDonagh returned to this subject in June 2010.
"There are certain monetary consequences arising from implementation
of this direction,'' Mr McDonagh writes to Mr Lenihan.
"In effect NAMA had to follow the money already paid,'' Mr McDonagh
writes. He points out that most of the loans in question were made by
Anglo Irish Bank, which was nationalised in January 2009.
It is understood the total amount in question was €1bn, although NAMA
found a way to halt about 50pc of these applications.
A spokesman for NAMA said the organisation accepted the decision
reached in 2009, but was only prepared to accept these loans at full
value if backed up by proper paperwork and if the loans were justified
on strict commercial grounds.
The Irish Times reports that former Anglo Irish Bank chief executive David Drumm has taken
the unusual step of hitting out publicly at the bank’s former
chairman Seán FitzPatrick over comments about his role at the
bank in the lead-up to its collapse.
Mr Drumm dismissed Mr
FitzPatrick’s characterisation of his position as Anglo chairman
in 2008 as a kind of back-seat role as “bullshit”. “He was all
over it,” he said.
Contacted at his home in Boston by The Irish Times, Mr Drumm
rejected Mr FitzPatrick’s comments – contained in a book
published last weekend – that he had no day-to-day role in the
running of the bank as the financial crisis intensified in 2008.
He also dismissed Mr FitzPatrick’s comments that he did not
know about the bank’s funding problems and that Mr FitzPatrick
left the running of Anglo to him.
Mr Drumm claimed Mr FitzPatrick began
“interfering” in his
management of the bank from late 2007 after problems developed
over the secret investment, amounting to 28 per cent of the
bank, by businessman Seán Quinn.
He also said he would not have applied for the job of chief
executive in 2004 had he not been put under pressure to do so by
Mr FitzPatrick, who has claimed he had no involvement in the
Mr Drumm has also contradicted Mr FitzPatrick, claiming that
he told him in July 2008 the names of 10 Anglo clients whom the
bank had asked to buy a 10 per cent stake held by Mr Quinn.
In a series of interviews for the book, The FitzPatrick
Tapes, Mr FitzPatrick claimed that he did not discuss with Mr
Drumm the names of the 10 Anglo clients. “He absolutely and
utterly was told the names – he knew who they were,” Mr Drumm
Another Anglo source with knowledge of the so-called Maple 10
transaction confirmed that Mr FitzPatrick was told some of the
names by another executive at the time.
Mr Drumm said that Anglo executives updated the board, which
included Mr FitzPatrick as chairman, about the bank’s precarious
funding throughout 2008.
“We had our usual scheduled board meetings but Seán
FitzPatrick called countless ad hoc meetings and board
conference calls, often at short notice, throughout 2008
specifically to deal with the funding crisis,” he said.
board member did not understand how banks fund themselves when
they joined the Anglo board, they had a PhD in funding by the
end of 2008.”
In the book, Mr FitzPatrick says he didn’t know about the
bank’s critical funding position until August 2008.
Mr Drumm said Mr FitzPatrick had a “very controlling” role in
the appointment of his successor as chief executive in 2004 –
contrary to Mr FitzPatrick’s comments that he had no role in the
He said Mr FitzPatrick’s interference in his management
forced him to complain to Anglo’s senior independent director on
the board, Ned Sullivan, in April 2008.
“It was damaging to the bank . . . it undermined the
management function within the bank as people began to wonder
who was in charge,” he said.
The Irish Times also reports that Portugal and Belgium are coming under renewed market pressure as
investor anxiety returns to the euro zone and top-level figures
line up to deny any new EU-IMF bailouts are in the offing.
With the euro closing yesterday at a four-month low against the
dollar, senior European diplomats will take stock of the
situation tomorrow at their first meeting since Christmas. The
engagement comes five days before euro zone finance ministers
gather in Brussels for their first talks of the year.
The European Central Bank (ECB) stepped up its purchases of
Portuguese bonds yesterday as Lisbon prepares for a crucial test
of investor sentiment with the auction tomorrow of €1.25 billion
in five- and 10-year bonds.
The Portuguese government, whose 10-year bond yields have
risen to record levels above 7 per cent, has been denying any
external intervention is required or imminent. Many market
participants believe otherwise, however, with the cost of
insuring against any default on the country’s debt also on the
There was similar pressure yesterday on the price of Irish
credit default swaps – as this form of insurance is known – and
reports of renewed ECB purchases of Irish debt. Such pressure
had marginal impact in real terms however as the EU-IMF rescue
means the Government has no need to raise money in the private
markets for up to two years.
Weekend reports by Reuters and German magazine Der Spiegel
which said prime minister José Sócrates was coming under
pressure from Berlin and Paris to follow Ireland now to avert
the threat of contagion were denied in Lisbon and further
“There is no discussion to this effect, and it is not
envisaged at this stage on such a possibility, be it for
Portugal or any other member state,” said a Brussels spokesman
for EU economics commissioner Olli Rehn.
While German finance minister Wolfgang Schäuble and his
Spanish counterpart Elena Salgado also dismissed the reports,
official sources acknowledge in private there is acute concern
about Portugal’s prospects.
In spite of the public position adopted by Mr Sócrates’s
government, some observers believe an external intervention may
well be unavoidable.
According to Germany’s Frankfurter Allgemeine Zeitung
newspaper, Berlin would prefer Lisbon to seek aid quickly if
necessary rather than draw out the process over “three or six
The country’s present situation is seen in some eyes to be
similar to Ireland’s in the run-up to the EU-IMF intervention,
with well-placed sources saying any failure to reverse the rise
in Portuguese bond yields would have grave implications.
Although news that the ECB was again in the market for
Portuguese debt provided a measure of confidence, this was seen
as nothing other than a temporary balm. After the yield on its
10-year paper rose as high as 7.45 per cent early yesterday, the
interest remained stubbornly high at 7.31 per cent even after
some of the heat dissipated.
The renewed turmoil is weighing also on Belgium, where
worries about the high national debt are compounding tension
over the failure of the country’s linguistically-divided leaders
to form a government seven months after a general election.
King Albert II yesterday ordered the caretaker government to
draft a budget plan for 2011 which will cut the budget deficit
to 4.1 per cent from 4.8 per cent in 2010. The target implies
cutbacks or tax increases of €1.8 billion.
Although diplomatic and other sources say the mounting force
of market pressure may yet persuade Belgian leaders to agree a
power-sharing deal, the latest effort to broker a compromise
came to nought last week and the king’s mediator shows little
interest in renewed talks. Amid the turmoil, investors have been
demanding near record premiums over the price of German debt to
hold Belgian paper.
Spain is also returning to the market this week with the sale
on Thursday of €2 to €3 billion in bonds. The sale is important
for the country, which has repeatedly denied it has any
requirement for external aid, as it will be a crucial gauge of
sentiment. It is widely acknowledged that any Portuguese
intervention would intensify pressure on Madrid.
The Irish Examiner reports that the manufacturing
sector returned to strong growth last year — up 15.7% — with experts saying it
will help lead the economic recovery.
Production for Ireland’s manufacturing industries for November was 15.7% higher
than in November 2009. This was the best performance on a monthly basis in 2010.
However, the seasonally adjusted industrial turnover index for manufacturing
industries was 1.4% lower in the three-month period September 2010 to November
2010 when compared with the preceding three month period, according to the
Central Statistics Office (CSO).
In the basic pharmaceutical products sector, production rose almost 37% while in
the computer electronic and optical products sector production fell 18%.
Bloxham analyst Alan McQuaid said things appear to have improved last year with
manufacturing output in the first 11 months of 2010 up 7.4% on average on the
same period of 2009, while total production was 6.8% higher.
"It now looks like manufacturing output will post an average increase in
volume terms for 2010 as a whole of between 7% and 8%, a very impressive
performance all things considered," he said.
The "modern" sector, comprising a number of high-technology and chemical
sectors, showed an annual increase in production for November 2010 of 21.7% and
an increase of 3.2% was recorded in the "traditional" sector.
"The bottom line is that external demand will be key to how Irish
manufacturers perform in the coming months. Any weakening of the global economy
will clearly have an adverse impact on output/exports.
"That said, Irish manufacturers are benefiting from improved competitiveness,
with the lowering of the cost base arising from the decline in wages and prices
across the economy expected to place Ireland in a very favourable position to
benefit from the eventual recovery in trade flows," said Mr McQuaid.
Employers group, IBEC said Irish industry has shown itself to be exceptionally
flexible and companies have been able to cut costs and improve productivity in
response to the crisis.
IBEC senior economist Reetta Suonperä said: "As global demand recovered, the
benefits became apparent during 2010."
Some of the sectors that saw particularly steep falls in output during 2009 have
returned to very strong growth in 2010 thanks to recovering demand and a weaker
Machinery and equipment, rubber and plastic and basic metals all posted
double-digit growth in November.
Besides a paid
the Financial Times provides the following options:
See up to 10
articles a month, access email services and portfolio tools
article a month
ECB intervenes as debt crisis deepens - - Move to buy Portuguese bonds as
investor fears turn towards Belgium; Alan Wilde, head of fixed income and
currency at Baring Asset Management, said: “The crisis is reaching another
key phase with debt auctions this week. It seems unlikely that Portugal can
avoid a bail-out.”
Concerns over Belgian debt levels grow - - King asks caretaker government to
move ahead with spending cuts; The call came as 10-year debt yields rose 12
basis points to 4.24 per cent, an indication of investors' growing nervousness
at financing Belgium's sovereign debt. Belgium now pays a 1.4 percentage point
premium, or spread, over benchmark German paper, the highest since January 2009.
Global accord targets credit bubbles - - Basel III offers co-ordinated
buffer against economic cycle; Part of the larger “Basel III” banking
reform package, the “countercyclical capital buffer” heralds a step
change in the way national banking regulators interact and is the first concrete
example of “macroprudential” regulation that seeks to moderate the
Falling off the wall: Rising wages will burst China’s bubble
- - Peter Tasker who is based in Tokyo says: The message is clear. The China
story that has been sold so skilfully all over the world is simply another
version of the “new era” thinking that has characterised every investment
mania from the South Sea bubble to the dotcom frenzy.
Radical rage: Paranoia disfigures the Tea Party - - Gideon
Rachman says ehen Gabrielle Giffords’ father was asked if his daughter had any
enemies, he replied bluntly – “Yeah. The whole Tea Party.” His comments
raised the central political question about the Arizona shootings. Is it fair to
link the attempted assassination of Congresswoman Giffords – and the killing of
six bystanders – to the current political climate in America? Or was this just a
random act of violence from which no wider moral should be drawn?
Chinese city allows personal investing abroad - - Wenzhou residents can send
up to $200m a year
Argentina suffers shortage of banknotes - - Government blamed for country’s
runaway inflation; Argentina is suffering a shortage of bank notes – with long
queues outside cash machines across much of the country.
California faces budget cuts of $12bn - - Among the areas in line to suffer
from cuts planned by Jerry Brown, the new governor of America’s most populous
state, are higher education and welfare services; California has a budget deficit of more than $25bn (£16bn), which Mr Brown, a
Democrat, said could only be closed by a “vast and historic realignment of
Access to the New York Times is currently free. If you are not registered, click
Giffords’s District, a Long History of Tension - - The 8th Congressional
District of Arizona, home to Representative Gabrielle Giffords, is a classic
swing district that shares a long border with Mexico and has known its share
of tensions; She and aides began expressing worry about what they saw as an
escalation of threats after a year of brutal town hall meetings over health
care. They began to take precautions. “When we did a swing through the
district, we began telling the police what we are doing: We let them know
where we were going to be,” said Rodd McLeod, her campaign manager.
Killing Underlines Divisions in Pakistan - - The same young lawyers once
seen as a force for democracy are now rallying behind the confessed killer
of a provincial governor; Their energetic campaign on behalf of the killer
has caught the government flat-footed and dismayed friends and supporters of
the slain politician, Salman Taseer, an outspoken proponent of liberalism
who had challenged the nation’s strict blasphemy laws. It has also confused
many in the broader public and observers abroad, who expected to see a firm
state prosecution of the assassin.
Judges Berate Bank Lawyers in Foreclosures - - In many opinions, judges
have accused lawyers of processing shoddy or even fabricated paperwork in
foreclosure actions when representing banks; More broadly, the courts in New
York State, along with Florida, have begun requiring that lawyers in
foreclosure cases vouch for the accuracy of the documents they present,
which prompted a protest from the New York bar. The requirement, which is
being considered by courts in other states, could open lawyers to
disciplinary actions that could harm or even end careers.
The Politicized Mind - - David Brooks says the political opportunism
occasioned by the Tucson massacre has ranged from the irrelevant to the
irresponsible, all while we ignore the most productive questions.
A Resurgent Chrysler Says It Is Here to Stay - - Chrysler is in the
midst of a new-product blitz that includes revamped models, as well as
smaller models it will get from Fiat.
In Detroit, Toyota Vows to Earn Trust - - Akio Toyoda, Toyota’s
president, made his first appearance at an American auto show, and said his
company was committed to gaining the trust of consumers.
S.E.C. Files More Charges in Galleon Case - - Four people and a hedge
fund, Trivium Capital, face civil charges brought by the Securities and
Exchange Commission; “Today’s action reveals disturbingly corrupt
arrangements — faithless company executives who secretly pass corporate
information to hedge fund managers willing to violate the law for profit,”
said Robert S. Khuzami, the S.E.C.’s head of enforcement.