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News : Irish Last Updated: Feb 13, 2013 - 10:13 AM


Wednesday Newspaper Review - Irish Business News and International Stories - - February 13, 2013
By Finfacts Team
Feb 13, 2013 - 9:43 AM

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The Irish Independent reports that hundreds of jobs have been lost in a devastating day for the troubled retail sector.

Big name companies including HMV and B&Q are shedding almost 400 staff between them, although there remains hope that 600 jobs at the DIY chain will be saved.

Jobs Minister Richard Bruton said: "It is a difficult time and our sympathy is with the workers directly affected."

He argued that private-sector employment in the past 12 months had grown by 12,000 and some sectors were flourishing.

However, the retail sector has lurched from one crisis to another since Christmas with a series of high profile firms experiencing financial difficulty.

HMV Ireland's 300 staff will now be made redundant after the receiver appointed to the music and entertainment chain failed to find a buyer.

Troubled

The workers who had been previously placed on temporary lay-off are being let go and the 16 stores around the country will remain closed.

The staff will receive statutory redundancy only, equating to two weeks' pay for every year of service and one further week's wages.

Receiver David Carson of Deloitte said he wasn't able to find a buyer for the troubled business. A spokesman for the receiver said all workers have now been paid up to date.

Administrators at HMV in the UK also announced last week that it was closing 66 of the chain's stores with the loss of 1,000 jobs.

Meanwhile the High Court confirmed an examiner to B&Q Ireland – which operates nine home- improvement stores across the country employing 690 people, of whom 500 are part-time workers.

The company's two stores in Athlone and Waterford will close with the "regrettable" loss of 92 jobs – 69 part-time and 23 full-time, Mr Justice Peter Kelly noted.

The company's other stores could survive with renegotiation of what the judge described as "extraordinary" rents.

Declan McDonald, who was appointed as examiner yesterday, had been encouraged by expressions of interest from four potential investors in addition to the company's parent, Kingfisher plc.

The court previously was told all vouchers, credit notes and deposits will be honoured by the company throughout the examinership period.

Another DIY store, Wickes in Limerick, has also ceased trading with the loss of 25 jobs.

A letter to all Limerick staff from Wickes manager Ciaran Ellis said the layoffs arose from "a decision imposed on us by external factors beyond our control". The company was last night contacted for comment, but none was forthcoming.

In further bleak news, fashion chain Republic is also set to enter administration in the UK.

Republic has 121 stores employing 1,000 people in the UK, and also retails in Liffey Valley, Blanchardstown in Dublin.

The Irish Independent also reports that  THE Government will stick to its programme of planned budgetary cuts, despite the deal on the controversial promissory notes, stockbroker Davy has forecast.

It also claimed that the State would save on average €800m a year on interest costs as the deal sees the extension of cheap ECB funding at 0.75pc.

The Government announced last week that the promissory notes used to help bail out the now-defunct Anglo Irish Bank and Irish Nationwide would be replaced with long-term government bonds.

But the stockbroker said that while the savings were significant, they would not be "transformative for the budgetary arithmetic".

Conall MacCoille, Davy's chief economist, told the Irish Independent: "We're not going to be changing our forecasts widely on the back of this.

Impact

"Perhaps there is some positive impacts on confidence that could help in the margin, but in terms of the fiscal consolidation, we don't expect it to be a big impact and we've still got quite a big one (Budget) this year and a substantial one next year."

Davy said the decision by Europe's finance ministers last month to look at extending the terms of some of Ireland's bailout loans could be more significant than the promissory notes agreement.

The stockbroker said the underlying benefit of the deal was small for the years up to 2015, with little impact this year because of the cost to the Government of the Eligible Liabilities Guarantee scheme (ELG), under which depositors at the now-liquidated Irish Bank Resolution Corporation (IBRC) can claim.

The Government expects this could cost the Exchequer up to €1.1bn this year.

Davy's central view is that the Government will stick to its programme of planned budgetary cuts amounting to 2.5pc of economic output this year and 1.8pc next year.

"With the growth outlook uncertain and the Government locked in negotiations to secure savings on overshooting current expenditure, there is little room for manoeuvre," Davy said.

Exchequer

Announcing the deal last week, both Taoiseach Enda Kenny and Finance Minister Michael Noonan said the State would have to borrow €20bn less over the next decade as a result.

It also claimed that spending cuts and tax increases would be €1bn less up to 2015.

Davy said the next step for the Government would be to extend the terms of the EU/IMF bailout loans.

It claimed that the proposal agreed by Europe's finance ministers last month to consider extending the terms of some of the loans could be more significant than the promissory note deal.

"Extending EU/IMF funding could reduce funding needs by €43bn – more than twice the €20bn reduction in the NTMA's funding requirement – out to 2023, due to the agreed extension of ECB funding," Mr MacCoille said.

The Irish Times reports that former property magnate Sean Dunne will consider filing for bankruptcy in the US, where he now lives, after Ulster Bank’s successful initiation of proceedings against him in the High Court in Dublin.

It is understood that Mr Dunne is contemplating a voluntary application in the courts in Connecticut to circumvent the UK-owned bank. If he proceeds, the Co Carlow businessman would follow a similar route taken by former Anglo Irish Bank chief executive David Drumm, who filed for bankruptcy in Massachusetts in 2010, avoiding proceedings taken by Anglo in this State, where the regime is more onerous than in the US.

Mr Dunne owes €164 million to Ulster Bank arising from the financial support provided by the lender for the purchase of the Jurys Hotel site in Ballsbridge, which was rejected by An Bord Pleanála.

Personal guarantees 

Ulster Bank applied for leave to serve bankruptcy proceedings on the developer during his appearance in the Connecticut courts where he is the subject of an action taken by Nama over personal guarantees on bank debts of €185 million.

Bernard Dunleavy BL, for Ulster Bank, said that while Mr Dunne was living at Indian Field Road, Greenwich, Connecticut, he was a citizen of this State, carried on business here, acted as a landlord here and his family continued to live here. Insofar as he was resident in the US, he was there on a temporary business visa, he added.

The move could create complications for Nama’s case against Dunne and his wife, Gayle Killilea, if he is declared bankrupt here or Connecticut.

Wealthiest areas 

Nama tried unsuccessfully to freeze the couple’s assets and are claiming that Dunne fraudulently transferred a half-share in an apartment in Geneva to his wife, which she then sold, and that she is using the proceeds to redevelop properties in Greenwich, one of the wealthiest areas on the US east coast.

Kevin Nowlan, a former Nama employee who managed the agency’s relations with Mr Dunne, is due to have a sworn statement taken in a legal deposition set for Friday.

The court granted Ulster Bank leave to serve legal papers on Mr Dunne.

The Irish Times also reports that Ryanair will appeal any decision by the European Commission to prohibit its takeover of Aer Lingus, the airline said yesterday, as it confirmed that European regulators had indicated they plan to block the deal.

Discussions between Ryanair and the European Commission had been intensifying in recent weeks, with a final decision due before March 6th.

However, Ryanair said yesterday that it had been told by the Commission of its intention to prohibit the deal.

“It appears clear from this morning’s meeting, that no matter what remedies Ryanair offered, we were not going to get a fair hearing and were going to be prohibited regardless of competition rules,” a Ryanair spokesman said yesterday.

Final decision 

A European Commission spokesman said a final decision would be made at the end of February or beginning of March.

While Ryanair’s share price stayed relatively steady yesterday, Aer Lingus shares fell as much as 7.3 per cent yesterday, the biggest intra-day drop in almost a year. About 1.8 million shares were traded, more than 3.5 times the daily average during the last three months.

Ryanair declined to comment yesterday on whether it now intends to sell its 30 per cent shareholding in Aer Lingus. Ryanair has already spent €407.2 million on acquiring a 29.8 per cent stake in the airline. It also declined to comment on whether it plans to submit additional concessions to the European Commission before March 6th.

Ryanair’s latest takeover bid for Aer Lingus, represented its third takeover attempt of the company.

The airline’s first attempt was prohibited in 2007 on competition grounds, while it withdrew its second bid in 2009 following Government opposition. The airline was believed to have offered a much more comprehensive remedies package this time around to allay EU anti-trust concerns. This included a deal with Flybe whereby Ryanair would give the British airline €100 million in cash to help acquire half of Aer Lingus’s short-haul business, as well as a commitment from IAG to operate its London-Gatwick routes.

Noting previous aviation merger decisions, Ryanair accused the EU of “holding Ryanair to a much higher standard than any other EU airline”.

In a statement yesterday, Aer Lingus said it was in a much stronger than it was at the time of the previous Ryanair offers and was Ryanair’s only significant competitor on the vast majority of Irish air routes. Last week, the former State airline posted a strong set of full-year 2012 results that saw its operating profit rise 40.7 per cent to €69.1 million.

“The reasons for prohibition are therefore even stronger in this instance than with the previous offers,” Aer Lingus said in a statement yesterday.

Minister for Transport Leo Varadkar said the Ryanair offer did not meet required standards to ease competition concerns. “The Ryanair remedies package as reported has not satisfied the Government’s concerns about connectivity, competition or employment.”

The Government, which owns 25 per cent of the former state airline, had previously voiced its concerns about the merger. It is expected to sell its stake as part of the conditions of the IMF-EU bailout.

Anti-competitive 

Cork Chamber yesterday said a Ryanair-Aer Lingus merger would be anti-competitive and bad for Irish business.

Cork Chamber president John Mullins said a favourable decision for Ryanair would effectively leave a single operator in control of the vast majority of commercial flights into and out of Ireland.

The rejection of Ryanair’s bid for Aer Lingus, if confirmed, will be the first time the Commission has blocked a proposed merger twice.

The Irish Examiner reports that the High Court has confirmed an examiner to B&Q Ireland Ltd, whose situation the judge said had aspects that were both “depressingly familiar” and “refreshingly new”.

B&Q operates nine home improvement stores in Ireland, employing 690 people, of whom 500 are part-time workers.

As part of cost-cutting proposals, B&Q’s two stores in Athlone and Waterford are to close with the “regrettable” loss of 92 jobs, 69 part time and 23 full time, Mr Justice Peter Kelly noted.

A key ingredient for the survival of some of the company’s other stores includes renegotiation of what the judge described as “extraordinary” rents. The total rent roll for the nine stores is €11.6m a year, €5.8m above market rates, the court heard.

Declan McDonald, who was appointed interim examiner to the company late last month, had been encouraged by expressions of interest from four potential investors in addition to the company’s parent, Kingfisher plc, the judge was told.

Rossa Fanning, counsel for B&Q, presented letters to the court in which Kingfisher, owed some €17m by the company, indicated it was prepared to support the company through the examinership process and to invest in it on certain conditions, including implementation of a cost-cutting programme and the successful negotiation of a survival scheme.

Mr Justice Kelly said yesterday he was satisfied to appoint Mr McDonald as examiner. There was no opposition to the proposed appointment while the Revenue Commissioners took a neutral position. There are no arrears owed to the Revenue and the company has undertaken to meet payments due shortly to the Revenue, totalling about €1.25m.

The judge said the situation of the company had aspects which were both “depressingly familiar” and “refreshingly new”.

It was depressing familiar in that it was “bedeviled” with a fall of 34% in revenue since 2009 and it was also obliged to pay “extraordinary” rents. Its turnover had fallen 24.2% from a peak of €124m in 2009 to €94.2m in the financial year to the end of Jan 2012.

The refreshingly new aspect was that the company had no bank debt and had no arrears to the Revenue, Mr Justice Kelly said.

He was satisfied from the material before the court that the company, provided certain conditions were met, had a reasonable prospect of continuing to trade and to be run in a profitable way into the future.

The examiner would have a lot of work to do, including renegotiation of rents, but the court hoped this examinership would conclude quickly, the judge added.

The court previously was told all vouchers, credit notes and deposits will be honoured by the company throughout the examinership period.

Foreign news reviews and more comprehensive coverage of Irish news is available in our Daily News Digest in the Global category on Finfacts Premium.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.


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