Siteserv, what’s that? It’s an Irish company some of you mightn’t have heard about but which employs 900 people in Ireland who provide a wide range of services to public and private companies. Like installing Sky boxes for Sky or providing installation and maintenance services to the ESB – take a look at its services here. It’s a fairly profitable company – the latest accounts are here – but it has a mountain of debt built up during the Celtic Tiger era in acquiring other companies.
Why is Siteserv in the news? It has gotten into financial difficulty and is being sold. The latest is that 99% of Siteserv’s shareholders have just agreed to sell the company for €45m.
And what’s interesting about that? The buyer is a company called Millington, based in the Isle of Man, which numbers Denis O’Brien and Leslie Buckley amongst its owners. But there appears to be at least two competing offers for Siteserv for more than €45m – one for €52m from Anchorage and one for €60m from Altrad. We were also interested to find out that Dublin solicitors Arthur Cox were reported to have acted for both Siteserv and Denis O’Brien, though the company says it has procedures in place to deal with potential conflicts of interest.
But what is particularly interesting is that IBRC had given Siteserv a loan for €150m, but is set to get back less than €50m as part of the sale, and will write off the remaining €100m. And at the same time, the shareholders in Siteserv are set to pocket €5m. That turns the usual rules on debt on their head, normally the shareholders are wiped out first and secured lenders – which is what IBRC is understood to be in this case – tend to be top of the pile when it comes to prioritising repayment of debt. Remember Anglo in 2009 and the shareholders losing everything, but Anglo’s secured creditors, including senior bondholders, were repaid everything.
What has this to do with me? Well, you own IBRC, which is the company that merged Anglo and Irish Nationwide together. So YOU are writing off €100m – more than the €80m that has been collected from the controversial Household Charge – and at the same time shareholders are keeping millions.
But surely IBRC protects my interest. You’d think. After all, with annual rewards totalling €866,000 – about twice what the NAMA CEO gets – Mike Aynsley, the Australian CEO of Anglo must be a complete genius. And if anyone can protect our interests, he can. After all, that’s what he’s being paid so handsomely to do. Sadly to date, IBRC hasn’t defended its agreement with the €45m sale price, nor has it explained why shareholders walk away with millions while the taxpayer suffers a €100m loss. And before you conclude that this is a modern day version of Robber Barons stealing a company from under us, there has been a sale process ongoing for six months which has been overseen by KPMG and Arthur Cox, so we should expect some standard of probity.
Why doesn’t IBRC just appoint receivers to Siteserv? Indeed, a good question. Remember it was just a year ago that IBRC, or Anglo as it was known then, orchestrated the receivership of Sean Quinn’s companies. So it’s not as if IBRC hasn’t a track record of appointing receivers to insolvent companies. There are suggestions that Siteserv would lose several contracts if it were placed in receivership but these have not been publicly addressed.
And Denis O Brien, he’s the wealthy businessman that’s as crooked as a dog’s hind leg? Although the Moriarty Tribunal report last year had unkind things to say about Denis O’Brien and politician, Michael Lowry, both rejected the Tribunal’s findings which don’t have the force of legal judgments, and since then, neither the Gardai nor Director of Public Prosecutions seem to have picked up the baton offered by the Tribunal report to initiate criminal investigations. So, innocent he stands. Beyond that, he’s Ireland’s richest man having had a great start with the controversial Esat deal which the Moriarty Tribunal investigated, but he has gone on to make billions in mobile telecoms in the Carribbean and Pacific. And on the positive side, he made a huge contribution to the recovery of Haiti after the calamitous earthquake and he is regularly honoured for his philanthropy. And he’s a pal of president Bill Clinton, one of Ireland’s greatest friends but a man with his own past – thinking more of his presidential pardons than the Lewinsky affair. Welcome to the 21st century where we need get used to dealing with two-dimensional characters, though in the case of Denis O’Brien, he rejects the suggestion of an untoward second dimension as set out in black-and-white in the Moriarty report.
And is there any chance that Denis might buy the company for €45m – which will involve us taking a €100m writedown on what we are owed by Siteserv – and then a couple of months later, sell the company for €52m or €60m? There’s certainly a chance!
But it’s Easter Sunday, should I really be getting het under the collar at a measly €5m being paid to shareholders? It’s just €5m from the €45m deal, but it would potentially be a €20m loss if the Altrad offer is foregone. €20m might just about get us out of bed this Easter Sunday morning!
“Why doesn’t IBRC just appoint receivers to Siteserv?” Or examinership? It is worth recording that the only reason we have such detail (limited as it is) is because Siteserv is a PLC.
I don’t suppose the IBRC is covered by FOI any more than Nama is. Anyway, what’s a €100 million when the banks and their buddies can pee maybe €80 billion of our money down the drain in the complete privacy of their gold-plated toilets?
@Brian, indeed a good point. How many such deals has IBRC done, far away from the gaze that is now focussed on Siteserv. NAMA sometimes complains that it is subjected to such scrutiny but Anglo still has a loan book that is nearly two thirds that of NAMA. I suppose Anglo or IBRC as it is now known, has a track record of being a bank that can deal with impaired and defaulting loans, whereas NAMA is new. That lack of scrutiny of Anglo’s activities might be set to change unless it can justify its position with the Siteserv transaction.
There’s an 11th thing: Law firm Arthur Cox acted for both sides on the Siteserve deal. It had previously acted for Siteserv, but DoB [Millington] was specific in asking that a particular AC partner act for him/them. Apparently the law firm referred this to some ‘internal committee’ who gave the go-ahead, but with the condition that another firm be chosen in the event of the dispute. So a good deal for DoB but a bad one for the Irish taxpayer.
When is this carry-on by AC ever going to be subject to control? The same pattern appeared in the Paddy McKillen case where they represented two sides…and as for NAMA…..they represented Anglo, BoI, NTMA, DoF; were integral to writing the legislation, and have been the highest earner re. legal services since the inception of NAMA. It is difficult to see how this in any way benefits the public interest.
Happy Easter namawinelake; and many thanks.
@Dorothy, I’m going to say that I did cover the Arthur Cox involvement above
“We were also interested to find out that Dublin solicitors Arthur Cox were reported to have acted for both Siteserv and Denis O’Brien, though the company says it has procedures in place to deal with potential conflicts of interest.”
Your point about the same firms cropping up in situations which can potentially give rise to conflicts of interest is well made. And a Happy Easter to you, Dorothy!
Thank you for the clear exposition. Since we are dealing with the minutiae of mere millions, would it be possible to clarify the following?
Millington is paying just over 45 million in total – from my reading 40 of that only is going to the IBRC and 5 to the Siteser shareholders. The IBRC debt is 150 million. So the write-off must be €110 million ?
@Cass, yes that looks correct, in fact I think that the IBRC loan is a shade over €152m, it’s not totally clear from the accounts, but the recent newspaper reporting has stuck with a round €150m.
Assume senior management and directors will be divvying up the spoils as “shareholders”.You would think ,Ansley by know would have developed a decent level of coulrophobia.Lots of talented RE developers must be pissed about this transaction.But then again,they don’t have the constantly grinning clown Hugh Cooney as Chairman.
@NWL probably goes without saying but Davy is wetting it’s beak here along with the directors,shareholders.You bet it’s a positive development!
“Today’s announcement is a positive development in that it sees the group’s operations move to new ownership on a debt-free basis while also returning cash to shareholders.”
http://www.davy.ie/LR?id=3476
I don’t understand – who has the debt – siteserve? Yes. I understand that the company is being purchased for 45m and it has debts of 150m to IBRC. I don’t understand why the remaing debt doesnt stay with the company post sale. People buy companies with existing debt all the time. In fact this company appears to be getting purchased for 45m, but recieve 105m of a w/o. That’s a great deal for the purchaser!!! Surely the 105m should remain, or become equity or a charge over future sale of business.
@Donal, Siteserv is insolvent in the sense that its debts vastly exceed its assets. So in its current state, Siteserv is worth nothing, in fact it has a negative value!
Well Cooney how are you doing with this,your name slashed all over the papers,taxpayers taking 100mil hit,are you promoting trust and confidence or an absolute embarrassment,resign you are a disgrace.
“The promotion and maintenance of confidence and trust including the protection of the good name of the National Treasury Management Agency (NTMA);”
Click to access CodeOfConductMembersOfNTMAAdvisoryCommittee.pdf
http://www.ntma.ie/AboutUs/governance.php
@JG,
It’s not just fish that smell…..
http://www.independent.ie/opinion/analysis/tom-lyons-a-done-deal-but-were-taxpayers-the-losers-3074211.html
@WSTT happy Easter great posts on other thread,why not allow the RE developers do a deal or two like this. 100 mil hit,5 mil juice for shareholders,that’s a 90% premium on closing price of shares.No issues with current management directors continuing,and the buyer an extremely controversial figure.Who is also rumored by the Sunday Times to be a significant borrower at Anglo.
Does Kenny have absolutiy zero political antenna or is it actually conceivable that he is this stupid.
Here,he is with that grinning fool Cooney,wonder who picked up the tab for Cooneys networking shindig,yep the taxpayer.At same time,he’s clipping 100 million for his failed,disastrous atrocious punt via Anglo.Cooney claims he’s a turnaround,work out specialist so WTF is he doing with Enterprise Ireland?
http://www.enterprise-ireland.com/en/News/PressReleases/2012-Press-Releases/Enterprise-Ireland-Client-Nualight-Announces-$100-million-Lighting-Alliance-During-Taoiseach’s-St-Patrick’s-Day-Washington-Visit.html
Bloomberg,ran photo from later same day with Kenny and the buyer having a huddle,or was it a cuddle?
@JG, Hi John. Happy Easter to you too. Some wishful thinking by Colm McCarthy below:
http://www.independent.ie/opinion/analysis/colm-mccarthy-states-gigantic-portfolio-of-property-and-bank-loans-will-be-a-tough-sale-3074209.html
I heard the buyer the Sunday Times mentioned was actually the biggest borrower.
P.S. I really do not believe that NAMA understands the magnitude of its task and the shallowness and lack of liquidity in the market that it will be selling into. In the end both NAMA and the other banks will have to sell large portfolios of loans to the Blackstones and Lone Stars of this world at hugely discounted prices, mainly because they have no idea, or experienced at this level. As Com McCarthy points out – It completely dwarfs them. €100 billion to be sold into a market that only absorbed €2 billion per annum at the height of the boom….. no chance.
@WSTT, we’ll see about the foreign investment, but last year there was a blogpost on the mysterious absence of foreign investors in Irish commercial property. This was part 1.
Part 2 was intended to explore the reasons why Ireland, a country with an evolved democracy, a perceived low corruption and honest and open economy never, NEVER attracted substantial international investment, unlike most other countries where trans-national investment is commonplace. At the peak in 2006 the Irish commercial market was worth €3bn, and according to NAMA none of this was from foreign investment.
The reason Part 2 was never published was that no international investor was willing to comment on the record – mostly because they’re all running the rule over Irish property at present, particularly with NAMA, and they don’t want to jeopardise their chances -but the general view seemed to be that Ireland suffered from a property sector – domestic investors, landbank owners, property companies, public records, associated professional services, banking, planning, media, political clientelism – which was impenetrable to outsiders, or at least expensive to compete with.
And that planning in Ireland was particularly capricious, and this from people who would be familiar with the murkiness of Spanish, Polish, Hungarian, Bulgarian, Italian and even British and American planning. Good to see we’re world leaders at something!
But if we have been unable to attract substantial foreign investment in the depressed punt-era 1980s, the nascent Celtic Tiger 1990s, the euro-era 2000s with the crazy boom, then why do we think we can attract it into property now? Unless the property is sold for a song?
@WSTT
Colm McCarthy’s figure of ~30 billion for NAMA and the same for IBRC is subject to question. IBRC have gross loans of $28 Billion at Dec 2011 but have a reserve of ~10 billion against that, giving a net figure of ~18 billion.
But the substance of his article seems correct, and set against €2 billion per annum sales at the height of the boom make the policy of ‘asset’ disposals seem more like lemming like insanity rather rational thinking.
The disposal agenda does not add up even at the appalling scenario you outline below.
“The foreign investors seek IRR yields of 25% plus equating to a 10% (min) to 15% yield. They are greedy …. and they smell blood..”
The question must be asked to whose advantage is this policy of rapid deleveraging. Ireland will need to take losses of 60%-80% in order to satisfy an agenda that yields no benefit to the economy, the nation or its people. The only people satisfied will be the ECB and the fire-sale scavengers. The remaining rotting carcases of NAMA and the banks will be left to a defaulting State to eat.
Ireland must refuse the deleveraging agenda. Its as simple as that. National disaster, a good deal worse than already experienced, lies down that route.I hope we have the brains to see that coming and the guts to say no.
@WSTT hoping Harrington makes a good run of it this afternoon,should be exciting final round my money on Big Phil,no not that incompetent Irish politician.
Great article,when you review Coppers recent radio interview with Frank,then look at the particulars of this deal,bizzare weird sort of sadistic obsession with persecuting RE businessmen,who created jobs,wealth.
Here is Siteserv’s mission statement,obviously that failed too.Actually,hold on mission accomplished thanks lads,sorry bout the 100million.Who was advising Anglo,they should have appointed receivers and fired the board for incompentance and burnt the shareholders.NAMA,wasting,time energy and resources with private dicks,going after failed broke RE developers,is much more productive,Conney should resign or be fired from all state boards.
He’s on the advisory board of NTMA,that’s like being on the Federal Reserve board over here,not a chance it would happen,no way.He would have been shown the door long time ago.
“We seek a fair and responsible profit, enough to keep the company financially healthy for the long term and to fairly compensate shareholders and investors for their money and risk”
http://www.siteserv.ie/mission.html
@WSTT you made a great point regarding excluding smaller investors by NAMA establishing QIF’S.Is there any rational argument or reason for not fast tracking REIT,legislation it’s not controversial.Accepted,established vechicle for smaller investors.There,was only one CMBS,or Commercial Mortgage Backed Securtization ever done in Ireland,Opera.
Some commentators and rating agencies had concerns relating to the geographic concentration of assets,NAMA had decent asset and geographic diversification,why did they not explore that exit route?
@JG,
It like Dalkey United playing Barcelona, John. They don’t have a clue. Their heads are stuck in the WAG’s knickers and big investigations are required feeling their legs to see whether or not they are wearing diamond ankle bracelets! They are more interested in how their latest assault on the Grehans or Sean Dunne plays out in the Sunday papers than in managing and selling the assets in keeping with the brief that they were given under the Act.
And NWL makes great points about the disinterest of non-Irish investors. They are circling at present – but only because we have a market at “cash-only” level. The foreign investors seek IRR yields of 25% plus equating to a 10% (min) to 15% yield. They are greedy …. and they smell blood. We have no domestic RE investors left that can get core financing from the Irish based banks (and that includes UK domiciled). We have two left that would only consider it at around 50% LTV, but they would both prefer to lend to foreign Funds. No green shirts here! The locals, who have loyalty to the Irish market (God knows why!), have no chance of getting any credit from the banks – so it will all fall to the vultures eventually … and at their price too. They know it – but NAMA still lives in the cuckoo’s nest, hoping that they will eventually beat Shamrock Rovers.
Or put it like this, NAMA thinks that it’s a shark, but it’s swimming with the great whites!
@JG, I believe that they are considering it, John, but nothing ever happens quickly here; plus they hate introducing anything that sniffs of a tax break. As for QIFs – It makes no sense that the little people (aka the general public) are excluded from buying them other than the usual political or Revenue/DoF begrudgery…… Although, John Mulcahy is well known for his partiality for dealing with institutions and funds and, it is alleged, that he has no great fondness for negotiating with the great unwashed.
They are set up to churn the money it’s the 2 and 20 rule.Most foreign buyers want two exit strategies,sell to the locals or exit via over leveraging the assets,loan to own programme.IRR or Internal Rate of Return is the metric,the shorter the money is out the higher the IRR,hence they get a bigger share of profits.
Foregin,buyers are concerned about going home or getting out,if NAMA does not leave a few locals standing they won’t attract off shore or international buyers,as the don’t have anyone to sell too in say year 3 of the funds life.
While,amusing to me at first the relentless pursuit and demonization of RE developers is now farcical,sad thing is most of them believed or doubled down at or around the peak,hiding or sheltering assets was clearly a low priority.
Also,heard that rumour regarding the biggest borrower status.
In Silence of the Lambs, It was Hannibal “the cannibal” Lecter who said to FBI agent Clarice Starling: “All good things to those who wait.”……
So it is with the Hedge Funds. They will wait and not only will they get their 2 and 20, they will get their teen yields and 2.5 times returns also.
Indeed Enda indeed it was.
“A devastating critique of a powerful elite, exposing a gross abuse of privilege. A rank abuse of public office, a devastating abuse of public trust.”
http://www.thejournal.ie/in-full-enda-kennys-dail-statement-on-the-moriarty-tribunal-2011-03/
http://www.bloomberg.com/photo/american-ireland-fund-national-gala-/163256.html
“Before sitting down to dinner, House Democratic Leader Nancy Pelosi, in an elegant Thierry Mugler jacket and pearl choker, huddled with Kenny and Irish businessman Denis O’Brien, while the Irish ambassador to the U.S., Michael Collins”
So THAT’S why O’Brien was cozying up to the Taoiseach at the NYSE. O’Brien needs political patronage in order to escape the hangman’s noose that Quinn is struggling with. It’s probably less about new business and more about getting away with the swag from existing businesses.
Alan Dukes is doing God’s work at Anglo then?
Indeed the lord works in vary mysterious ways,he absolutly insisted on ONLY 150,000 quite insisting in fact,add in extra 100 grand in pensions,bingo back on quarter million a year,praise be the lord.
“Yesterday, Mr Dukes said that while Mr Lenihan had signed off on an increased salary of €250,000, he had insisted on taking just €150,000. He said taking a reduced fee was the “appropriate thing” to do.”
http://www.independent.ie/national-news/chairman-of-anglo-cuts-own-salary-by-100000-2305044.html
“FORMER Fine Gael leader Alan Dukes was last night dragged into the pensions controversy as he refused to waive his €100,000 double political payment despite earning a similar amount as the state-appointed chairman of Anglo Irish Bank.”
http://www.independent.ie/national-news/dukes-will-not-give-up-his-two-pensions-even-with-anglo-job-2156961.html
@John, Anglo, or IBRC as it is now known, seems not to have any difficulty with Siteserv paying its CEO €401,000 per annum even though what is now contemplated is a €100m-plus write-off of the IBRC loan to Siteserv. Poor NAMA which gets flak for sanctioning €70-100,000 salaries for developers in most cases, and €200,000 in two and here we have Siteserv which is deeply under water – given the current offers for the company – and it is paying double the NAMA max. Double standards or what?
It is also interesting reading the 2011 Accounts which were audited by Mazars who provided an unqualified “true and fair” view of the accounts in July 2011, at a time when the group had a balance sheet value of €6m, even with its €150m of IBRC debt.
Nine months later and the company has lost €110m of its value, that is, it is worth minus €105m with the €150m IBRC loan or €45 without it.
This Siteserv story is certainly growing legs. The last annual report is here.
Click to access 2011_siteserv_plc_annual_report.pdf
@NWL thanks for that had a quick look at them when the news broke,this was also quite interesting.Given that NAMA,allegedly pulls the trigger on very short notice.Plenty time for the boys to arrange their ducks,why the sudden panic?
“Existing facilities re-negotiated through to December 2012 with resultant
interest savings of c.€2.5m in FY2012 and up to c.€2.9m in FY2013.”
One way of paying down an over-geared loan is to buy some other distressed loan from the bank below value and spread the upside over the total indebtedness.
@WSTT huh….lost me sounds very complicated!
regarding hiring the help,anyone who puts ridiculous letters like FRICS,RICS,MIAVI is overcompensating for shortcomings or inedaquacies in other departments.What did his little shop do 20 mil I think at top of market,they just another fee gouging shower of chanchers with their hand in your pocket.
We treat JLW and other bucket shops with the disdain they deserve,most of what they produce in backward looking and self serving.
@JG, Sorry John, maybe I was being a little too obscure.
If you buy a company like say, Siteserv, from a bank that you owe a lot of underwater loans to; and you buy it at a discount to value – it is in both your interest and the bank’s interest. Especially if you were to spread the acquired “veiled” value over your total indebtedness in said bank.
@WSTT I was being its dick,sorry.
Grab a pint enjoy Harrington making a run at the masters, but thanks as always.
@JR, I couldn’t agree with you more. You are 100% correct. But unfortunately that’s not going to happen and the inward investment money (the carpet baggers) will make a large obscene fortune on the carcass of the Irish people. All that stands between us and that is NAMA. And truthfully – the officers there are out of their depth. They have neither the funds (essential), the experience, nor the expertise to save the situation.
Looks like fair play will prevail in this deal.
When the winning lot decide what they don’t want,
the losing lot will have the rest.
The Irish Times – Monday, April 9, 2012
Failed Siteserv bidder open to buying ‘any part’ of group
In this section »
Augusta maintains glass ceiling
Irish group pledges to fund key US envoy post
Nama reduced rents in 99% of 2011 applications
COLM KEENA, Public Affairs Correspondent
ONE OF the parties who bid unsuccessfully for Siteserv has written to the new owners raising the possibility of buying part of the company.
French fund Altrad said last week it would have paid €60 million for Siteserv, but an EGM voted in favour of selling the business to an Isle of Man company, Millington, owned by billionaire Denis O’Brien, for €45.5 million.
Following last week’s EGM it emerged that Siteserv was planning to ask Britain’s Office of Fair Trade to investigate the purchase by French-based Altrad of Generation Hire and Sales in Britain last week.
Generation competes directly with Deborah Services, Siteserv’s main British subsidiary. Both provide scaffolding and other services to the construction industry.
Last week Altrad executive Ray Neilson said it might make complaints to both the Competition Authority and the Office of the Director of Corporate Enforcement.
However, on Friday Mr Neilson sent an email to Siteserv chairman Hugh Cooney and “Mr O’Brian” congratulating them in the wake of the EGM vote.
“We are today retracting the complaint that we lodged with the Competition Authority of Ireland,” he wrote, according to a copy of the email seen by The Irish Times.
“If Mr O’Brien and yourself decide that you are interested in exploring the opportunity of selling any part of the Siteserv companies in the future then we would be very happy to open confidential discussions on this subject and would sign a confidentiality agreement as is usual.”
He asked that Mr Cooney give Mr O’Brien a copy of the email.
Despite the move by Altrad, Siteserv is understood to be continuing with its complaint to the Office of Fair Trade in Britain.
The sale of Siteserv came after a process whereby Davy Stockbrokers and KPMG were asked by a sub-committee of the Siteserv board to find a buyer and to review offers.
The offer from Mr O’Brien will see shareholders getting €5 million and the Irish Bank Resolution Corporation (which comprises Anglo Irish Bank and Irish Nationwide) getting just €40 million of the €150 million it is owed by Siteserv.
Altrad was not the only party to say it had offered more for Siteserv than Millington. However, the offers were subject to conditions that Davy and KPMG believed made Millington’s offer the best.
On its own this is an interesting story but didnt Anglo also write off TV3 Debt?
Is there anything the regular Joe can do to object to this? It’s just one f**king outrage after another. We are being taken for total saps.
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Its all just so infuriating maybe people should start demonstrating to get our justice system involved in what happened and is still happening involving corruption in politics and business. How many people have had a relative who has emigrated int he last three years, will they ever return? On top of all the other indignities Irish people are facing in the country today I reaqlly can’t see why our justice system refuses to peruse prosecutions against those that have brought the country to its knees. I mean it was only a few years ago that emergency legislation was brought in to counter gangs, largely because of one housing estate in Limerick. I’m not condoning gangsters but these thugs effected the lives of fewer people than our white collar criminals, why can’t we see justice in Ireland?
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