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Archive for February 24th, 2013

Last weekend was partly spent in the pleasant surroundings of Liberty Hall in Dublin where a “counter” summit was organized by some Left wing parties; it was “counter” to the series of summits being hosted by Ireland as part of our six-month presidency of the EU.

It was a colorful affair with a distinct Left-wing tint, there was a trestle table of books on socialism and the like, with “The Grapes of Wrath” thrown in, attendees addressed each other as “comrade”, if they were to donate 10c to a collection box every time the word “class” was uttered – as in, ruling “class”, working “class”, political “class”, professional “class” – we would probably have enough to have paid the €3.06bn that was scheduled to have been paid on the Anglo promissory note in March before the abrupt liquidation, there was the recently-released-from-prison, Scotland’s Tommy Sheridan rousing some of the fairly-well attended talks, there were a few TDs including Richard Boyd Barrett who was billed as being from the “People for Profit” party, more aspiring TDs and MEP Paul Murphy. Well done to them all.

For those of you unfamiliar with the basic aims of the Left-wing of politics, MEP Paul Murphy was clear that one such aim was the nationalization of industry. Some of you might regard that as failed Communism, but when you think about it, we seem to doing just that in Ireland.

Most of our utilities are publicly owned, with minimal private sector competition. Farming has long since been a state-subsidised activity. The most recent nationalization has been the banking sector where we own 15% of Bank of Ireland, 99.8% of AIB and EBS, 100% of the Anglo/Irish Nationwide husk which is being liquidated, 99.5% of Permanent TSB and we recently provided €250m to the credit unions, and of course we own An Post. There is some private sector competition, but we largely control Irish banking.

And having ticked banking, we are now set to tick the media sector also.

RTELogo

We already own the biggest media company in the State, RTE, and we are footing the bill for the €70m loss at RTE in 2011 – that’s a deficit of €17m and other losses including pension losses – and the speculation is that RTE racked up a deficit alone of €50m in 2012.  Somehow we tolerate RTE paying obscene salaries in a media market 1/15th the size of the UK’s whilst turning in such astounding losses. But then again, that sort of behavior is the very epitome of a nationalized enterprise.

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Beyond RTE though, we learned this week that Independent News and Media may shortly be knocking on our doors looking for a bailout, or at least a debt write-off. We own, or part-own some of the eight banks that together have lent €400m-plus to IN&M [UPDATE: 25th February, 2013. According to the Sunday Business Post yesterday, €150m of the €430m borrowings "are understood" to be from Bank of Ireland and AIB. It is stated in a separate article in the same newspaper that Bank of Ireland is owed €80m, so presumably that means that AIB is owed €70m]. And given IN&M is balance sheet insolvent to the tune of €200m at 30 June 2012 and probably closer to €300m insolvent now, we are probably looking at taking a hit, though of course we could demand a share of the equity in IN&M which is worth, ahem, €16m. IN&M publishes the Independent, Sunday Independent, Evening Herald, Sunday World, Irish Daily Star, Belfast Telegraph, Sunday Life (like the Sunday World in Northern Ireland) and some provincial newspapers.

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Down in Cork, Thomas Crosbie Holdings has been hanging on for months despite its lenders, who are owed €25m, appointing consultants to examine restructuring options. Its lenders are understood to be AIB. TCH’s main titles are the Irish Examiner, Sunday Business Post and the Evening Echo but it also publishes Western People, Roscommon Herald, The Nationalist (in Carlow), Kildare Nationalist, Laois Nationalist, Waterford News and Star, Wexford Echo. It operates four radio stations – Midwest Radio, Red FM, Beat 102, WLR FM as well as the websites BreakingNews.ie and RecruitIreland.com. It formerly owned the Irish Post in England which was closed in 2011, with the latest being that unsecured creditors are likely to get 6c in the euro in settlement of debts. The latest accounts for TCH are for 2010 (to 2nd January 2011) and they indicated a pre-tax loss of €6m on €72m of sales. Given the circulation figures this week  showed the Examiner’s circulation decline by 6% in 2012 after a 9% decline in 2011, and given the challenging economic backdrop, it is hard to see how the group would have improved its performance and standing in 2011 and 2012.

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RTE’s main competitor, TV3 will have been studying recent developments in the Irish Bank  Resolution Corporation liquidation with great interest. Its main backer Doughty Hanson reportedly owes over €80m to what was Anglo, though reports in early 2012 suggested that IBRC had agreed to “park” this debt pending a sale of Doughty Hanson’s stake in the business.

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The latest results for the Irish Times are for 2011 and showed its after-tax loss at €1.8m on sales of €90m. Whilst still not particularly healthy, the group is cash rich with €10m on hand. However, the circulation figures this week showed an 8% decline for 2012.

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And how is the radio sector doing? Aside from RTE, the main private sector radio broadcaster in the State is Denis O’Brien’s Communicorp which in Ireland operates 98FM, Today, Newstalk, Phantom, SPIN and SPIN south west. It also operates radio stations in Hungary, Bulgaria, Latvia, Jordan and until recently Finland, Estonia, Czech Republic. Its latest accounts for 2011 published in November 2012 showed a modest loss of €400,000 down from €2m in 2010. The group has borrowings from Ulster Bank and Bank of Ireland which are now understood to stand at just over €80m.

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UTV, the TV broadcaster that operates the ITV franchise in Ulster, is, on this side of the Border, Communicorp’s main private sector competitor in radio. It operates Q102 and FM104 in Dublin, LMFM in Louth and Meath, Live95FM in Limerick, Cork96FM, Cork-based C103 which broadcasts across Ireland. Dublin-based Trinity Venture Capital owns 18% of UTV. Of all media companies operating in Ireland at present, UTV looks like it has the healthiest earnings and financial standing. It owes some GBP 60m in borrowings but it is profitable at both operating and post tax and exceptional levels, and has net equity of over GBP 80m according to its latest accounts for H1, 2012.

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British publisher, Johnston Press, publishes 12 regional newspapers in Ireland – Donegal Democrat, Donegal People’s Press, Dundalk Democrat, Leinster Leader, Leinster Express, Leitrim Observer, Longford Leader, Kilkenny People, Limerick Leader,  The Nationalist and Munster Advertiser, Tipperary Star and The Echo in Tallaght. Although Johnston also has a serious debt issue – its latest report for  H1,2012 shows it has borrowings of GBP 346m but has net assets of GBP 299m – its borrowings are not understood to be with Irish banks.

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We also have the Alpha Newspaper Group controlled by Ulsterman, John Taylor. John is a former Ulster Unionist Party MP and MEP, and a man that would be considered a stalwart of Unionism. He now sits in the House of Lords in London where he known by his title, Baron Kilclooney. Alpha is a media company based in county Tyrone and it owns a number of local newspapers in Northern Ireland and a radio station. In 2004, John bought four local newspapers in the Republic. He reportedly paid €14m for the Midland Tribune, the Tullamore Tribune, the Longford News and Roscommon Champion. [UPDATE: 25th February, 2013. The Roscommon Champion was subsequently closed in late 2010]. Alpha was behind the Athlone Voice which closed in 2010. The group is ultimately controlled by Tontine Rooms Holding Company Limited where John and his wife Mary, own more than 50% of the shares. The latest accounts indicate the company is balance sheet insolvent, that is, that it has assets of GBP 34.1m and liabilities of GBP 34.3m. It is not known if the group has any exposure to Irish banks.

Above is not intended as a comprehensive review of Irish media, and there is a smattering of smaller “independent” media operators across the State, including the Connacht Tribune group – which encompasses The Connacht Sentinel, Galway City Tribune, the Connacht Tribune newspapers and Galway Bay FM) and the Southern Star (incorporating the Skibbereen Eagle), to name but two.

So in the media sector, we’re already lumbered with RTE, we’re heavily exposed to TV3, we have exposure to IN&M and are likely to be asked for a writedown, Denis O’Brien’s Communicorp is heavily indebted and is turning in modest losses. We don’t know if we are exposed to John Taylor’s Alpha group though we believe we’re not exposed to Johnston Press. But you can easily see, how in the next few months, we might end up bailing out the media sector and nationalizing much of it. And this is all happening under centre-right governments – even the Lefties mightn’t have been able to accomplish all this.

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I am sure there is new information in the Ronald Quinlan article in the Sunday Independent today about NAMA’s pursuit of Sean and Gayle Dunne through the US courts – it’s just unclear what it is.

As regards this week’s hearing where the feisty Gayle is described as looking “vulnerable”, there is little reference in Ronald’s report to the proceedings. But if any of you can decipher the sentence “While she [US judge] refused to remove a protective order preventing Mr McDonagh’s deposition a witness, she left it up to both sides to decide a date for McDonagh’s deposition” please let us know. Now I think that Ronald is trying to say something here. Despite RTE, the Indo and Irish Times who all had reporters in the Stamford court room this week, all reporting that the judge ordered that Brendan McDonagh be “deposed” – meaning present a statement to Sean and Gayle’s lawyers and allow himself be questioned by them – sources close to NAMA were disputing that such an order had been given. As of Friday this week, the judge’s written order is not on the US court system, PACER, so there might indeed be some obstacle remaining in Gayle’s path to have Brendan deposed, but we don’t know what it is, if indeed there is an obstacle at all.

However it is not the US court hearing this week, but the rejection of Sean Dunne’s business plan that the Sindo article contains most new information on, but even here it is distorted.

Sean is said to have been the 39th biggest NAMA developer by borrowings. But what were those borrowings? Ronald today claims that Sean owed €892m. Elsewhere he says Sean owed €538m to non-NAMA banks. Sean is said to owe €65-80m to Cork developer, Michael O’Flynn. We do know on here that NAMA obtained a €185m judgment from Sean. These numbers don’t seem to add up, though maybe Sean sold assets to pay off some of the debt. Who knows?

The Michael O’Flynn angle is odd. Ronald reports that Michael obtained a €65m loan from Irish Nationwide and gave it to Sean in 2006 to buy 65 acres of farmland in Kildare. Ronald claims that if Sean were to have succeeded in getting 70% of the 65 acres rezoned, then “the money would not be repayable [by Sean] to him [Michael]” Does this make any sense to anyone, or is Michael O’Flynn scouting the country trying to get lands rezoned on philanthropic grounds?

Ronald claims that when NAMA assessed Sean’s business plan, there were six reasons to reject the plan and only three to support it. So, what were the nine reasons, O Oracle?

I can’t find anything which would count as a reason for NAMA supporting Sean but this is my extraction and interpretation of the six reasons why NAMA rejected the plan (as with most crossword puzzles, I might be wrong, so don’t take this as Gospel)

(1) No need for additional office development in IFSC/docklands where Sean had property and sites. That was NAMA’s view in November 2010. After this week’s announcements, that assessment appears to have reversed.

(2) Sean wanted €196-275m to finish off his property, NAMA thought he only needed €28m

(3) NAMA would get €31m in rent over 10 years if it foreclosed against Sean

(4) Refusal of Gayle Dunne and three children from Sean’s first marriage to provide statement of assets. NAMA concerned about the €58m purchase of Walford, the crumbling Edwardian home on 2 acres on Shrewsbury Road. There were “reports” that Gayle was involved in the purchase.

(5) Sean owed €538m to non-NAMA banks (and what about Michael O’Flynn). Sean is said to have had €612m of net liabilities in his statement to NAMA.

(6) Ongoing litigation involving Sean Dunne

So, in the Sindo crossword today, we know that some clues are missing – reasons for NAMA to support Sean Dunne, for example. We may have misinterpreted other clues. And some clues – like whether the judge this week ordered that Brendan McDonagh be deposed, or what was to happen to the Michael O’Flynn loan if 70% of the 65 acres in Kildare were rezoned  – have stumped us completely. Maybe Ronald might publish the answers in next week’s edition…

UPDATE: 24th February, 2013. We have gotten our hands on the transcript of last Tuesday’s hearing which supports Gayle’s comment as to the deposition of Brendan McDonagh. In other words, there is no order that Brendan be deposed at this stage, but having deposed John Coleman, Gayle and Sean can come back to the Connecticut court to seek to depose Brendan, and the court will give Gayle and Sean a date to depose Brendan.

Stamford19Feb13

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