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News : Irish Last Updated: May 8, 2013 - 12:00 PM


Wednesday Newspaper Review - Irish Business News and International Stories - - May 08, 2013
By Finfacts Team
May 8, 2013 - 8:20 AM

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The Irish Independent reports that  Education Minister Ruairi Quinn says the Government has made no decision yet on imposing public sector pay cuts if no Croke Park II deal is struck.

But the country's largest nurses union is threatening to ballot for industrial action if there are unilateral pay cuts.

Mr Quinn said the Government still planned to make the €300m savings from the public sector pay bill.

He said the coalition had intended to find these savings in the cuts to higher level pay and other measures in the rejected Croke Park II deal.

Labour Relations Commission chairman Kieran Mulvey has until next Tuesday to broker a deal.

Mr Quinn said the Government is waiting for him to report back to Public Spending Minister Brendan Howlin.

"We will have to wait and see what Brendan Howlin says to us next Tuesday," he said on RTE's Morning Ireand.

INMO general secretary Liam Doran said his union will ballot for industrial action if pay cuts are imposed.

The nurses union is holding its annual conference in Donegal this week.

The Irish Independent also reports that investment giant Blackstone's stake in Eircom is more than three times the size of the next largest shareholding in the business, according to a bond prospectus prepared by the company.

The prospectus is part of a marketing effort to attract investors to a €310m bond issue that Eircom plans to raise on the markets in order to repay part of its current €2.36bn of senior loans.

Last week, Eircom hired investment banks Goldman Sachs and JPMorgan to arrange the high-yield bonds deal.

The investment banks have begun a roadshow or marketing exercise ahead of the bond auction – which is expected over the coming week.

The prospectus reveals that €10m of the €310m that Eircom plans to raise will go to pay fees and expenses associated with the debt raising.

The balance of €300m will be used to redeem €326m of Eircom's current outstanding loans, at 92 cents in the euro. That money ultimately goes to Eircom shareholders.

Eircom's loans are owed to the same group of lenders who took ownership of the company last year, after the then over- indebted business was forced into examinership.

Ownership of the company was stripped from Singapore-based STT and an employee share scheme and handed to secured lenders.

Steve Schwarzman's Blackstone, including its GSO and Harbourmaster units, owns 18.6pc of Eircom. Blackstone was known to have become the biggest shareholder after the "debt for equity swap", but the extent of its dominance was not known.

Suffered

The next biggest stake in Eircom is held by financial investor Alcentra, which holds 5.12pc, followed by Anchorage with 3.48pc, Dublin-based Avoca with 3.28pc and Silver Point holds 2.95pc.

The top five Eircom shareholders own a third of the company. More than a hundred other investment firms and funds own the remaining stake.

That includes funds that hold their investment indirectly through a vehicle called Eircom Holdings Ireland Ltd.

Its holding of 5.38pc of shares is listed as the number two shareholder on the bond filing but the figure is understood to represent the aggregated stake of a number of funds.

The fact that the company is able to access the bond market at all is striking. Bondholders suffered the bulk of loses when Eircom walked away from €1.8bn of debt under 2012 examinership. In contrast, the holders of better secured loans suffered a loss of just 15pc on the debt they were owed and were handed the company, under the deal.

The Irish Times reports that the Government is set to abandon a key election commitment to extend free GP care to almost 60,000 people with long-term illnesses.

The plan, proposed as a first step on the way to free GP care for all, was supposed to have been introduced by March 2012. However, legal difficulties delayed its introduction and Ministers now accept there is no prospect of its implementation this year.

Instead, the Department of Health is looking at alternative ways of phasing in the government’s proposals for free GP care for all. One option being examined by Minister of State for Primary Care, Alex White, would be to phase it in over a number of years by extending the scheme gradually to people in specific age categories.

Another option being considered is the progressive application of a subsidy over a number of years to offset the cost of a medical card until such time as free care is introduced.

Because of the delay in introducing the first phase, it is looking increasingly unlikely that the broader commitment in the programme for Government to implement free GP care for all will be achieved as promised in the lifetime of the current administration.

Nor is there any indication where the €400 million-€450 million a year needed to fund the plan will come from.

Alarmed at this drift in a key Government commitment, the Cabinet’s health subcommittee recently considered how to get the phased introduction of free GP care back on track. Ministers were told it would take at least another eight to 10 months to introduce the legislation that would allow for the provision of GP cards to people with long-term illnesses.

While this target has been abandoned, Mr White has been instructed to research other options. Sources say the committee favours recasting the promise to ensure sufficient progress is made in the second half of the Government’s term.

“If people see we’re a good way down the road, I think they’ll accept that free GP care is on the way,” said one Minister.

At present, people with specified long-term illnesses get their drugs free but have to pay to see a GP.

Commitment

The programme for Government contains a commitment to introduce free primary care for people with long-term illnesses within the first year.

However, this deadline was missed as was a second deadline to extend the scheme further to people on the High-Tech drugs scheme.

No legislation has been published despite repeated promises that its introduction was imminent.

The plan ran into difficulties in the Attorney General’s office, where the legal advice was that granting medical cards on the basis of medical needs rather than income could be open to challenge.

Because the existing Long Term Illness scheme is regarded as legally frail, the Attorney General advised against using it as the basis for extending the availability of free primary care. The €15 million allocated for this purpose last year was spent on offsetting the HSE’s deficit.

Asked yesterday about its plans, the department said legislation was being drafted for the first phase of free GP care, but its statement made no specific reference to the proposal to provide medical cards for people on long-term illness. “The legislation will be published when it is completed,” it said.

The Irish Times also reports that HSE staff are being offered up to €36,000 in “incentivised payments” to take a three-year career break as part of a dramatic effort to cut the organisation’s operating costs.

No upper limit on the number who may apply is being imposed, and managers are being urged to facilitate applications “to the maximum extent possible”, according to a circular sent to staff yesterday.

Under the terms of the incentivised career break scheme, staff will be paid an incentive payment of one-third of gross pay up to a maximum of €12,000 a year for each year they are absent from work.

Applications have to be submitted by the end of this month and the career breaks will start on July 1st.

Scheme approved

The Department of Public Expenditure and Reform approved the scheme last week amidst growing concern over the stalling of Croke Park II on the finances of the Health Service Executive.

In January, the organisation committed in its 2013 service plan to making €150 million in savings from public service pay agreements but the failure to agree a new deal five months into the new year has thrown this target in doubt.

Separately, a career break scheme planned for the wider public service has failed to materialise this year. As a result, the Department of Health has been instructed to proceed with its own scheme as quickly as possible.

“This is a sign that, for the health service at least, things cannot wait for Croke Park II to be resolved,” a HSE spokeswoman said.

Under the service plan, the HSE said it planned to reduce staffing levels in the 100,000- strong health service by almost 4,000 this year. This target cannot be achieved by natural wastage alone.

The resulting savings will be used to fund new investment.

Under the career break scheme, applications may be refused “in exceptional circumstances” where required by the needs of the health service, for example where service provision is undermined. Refusals may also be issued if there is a conflict of interest between the activity employees propose to engage in during a break and their position in the HSE.

Managers will be allowed to prioritise between applications, depending on the level of savings involved and the specialist skills of those applying.

The period of a career break will not count for service or pension purposes, although applicants will have the option of contributing to their pension.
45km radius
On returning from a break, an employee will be assigned to the next appropriate vacancy to be filled within a 45km radius, with a guarantee of re-employment at the relevant grade within a year.

The HSE overspent its budget by €360 million in 2012 and was voted a supplementary estimate for this amount by the Dáil at the end of the year.

The Irish Examiner reports that the successful emergence from examinership of DIY giant B&Q (Ireland) and ladies fashion retailer Pamela Scott after releasing themselves from prohibitive rent agreements is likely to set a precedent for other similar-sized chains, according to industry representative Retail Excellence Ireland.

A significant number of high street retail chains — potentially as many as 10 — could be about to apply for examinership in a bid to release themselves from prohibitive rent agreements.

“The development is most interesting for international retailers with parent company guarantees, as precedent has now been set indicating that leases can be renegotiated even with a parent company guarantee in place,” noted REI chief executive David Fitzsimons.

“I understand that many other international retailers, trading in Ireland, will now investigate using the examinership process as a means of escaping penal upward-only rents,” he said.

B&Q emerged from examinership with 640 jobs and eight shops intact, having seen just one closure — Waterford last weekend and 47 job losses.

It had threatened a worst-case scenario of two-to-six shop closures, which could have seen over 200 jobs lost.

Its British parent, Kingfisher, is pumping more than €2.4m of fresh investment into the Irish operations and B&Q Ireland chairman Brian Mooney said the outcome gave the company “a sustainable future”. He said management felt “huge regret” over the closure of the Waterford store.

In the case of Pamela Scott, 137 jobs — across 12 stores — have been secured and the process has provided security for the future. Prior to entering examinership, all of the chain’s leases had upward-only rental clauses.

Following landlord negotiations — as part of the examinership process — around 65% of these clauses have been replaced with market rent leases, which can be negotiated both up and down.

The company has reduced its overheads by approximately 40%, through rent renegotiations, since 2007 and plans to open four-to-six new stores (as well as one in Athlone this month) before the end of this year, creating a combined 50 new jobs.

lThe receiver appointed to the Xtra-vision chain has announced the closure of nine shops in the country with the loss of up to 54 jobs.

Eight of the outlets are based in Dublin and the other store is in Roscrea. These were all considered to be unsustainable. The receiver is still looking to find a buyer for the remaining 130 stores in the group.

The receiver also announced 11 shops in Northern Ireland would be shut making 58 workers redundant.

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