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Archive for June 8th, 2011

There was almost a frenzy of speculation last month about the next high profile scalp to be claimed by NAMA’s receivers. Newspapers carried dark suggestions that perhaps two or even five household name developers might be on the receiving end of NAMA’s now famous 24-hour demand letters. But since the last receivership, that of Ray and Danny Grehan’s Glenkerrin Homes, there seems to have been a lull in NAMA receivership activity. And remember that there is quite a bad-tempered legal battle going on at the High Court at present between the Grehans and NAMA, the Grehans claiming that their loans don’t entitle the lender to appoint receivers. The bad blood is illustrated with the claim that the Grehans aren’t even allowed to set foot on one of their prize assets, the Glenroyal Hotel and Leisure Club.

But since 9th May, there hasn’t been any other NAMA receivership with the exception of the appointment last week of Declan Taite of FGS as receiver to two Kilkenny companies P&S Kavanagh (Thomastown) Limited and GBC Supermarket Limited, both with registered addresses at accountants FD O’Neill at Lapps Quay, Cork. P&S Kavanagh seems to be most associated with Kavanagh’s Super Valu at Cloghabrody, Dublin Road, Thomastown, Kilkenny. It is not clear if this property is subject to the receivership.

P&S Kavanagh (Thomastown) would not have been seen as a major NAMA developer though the fact that the receiverships are a consequence of lending from AIB would seem to indicate that the company had over €20m outstanding in loans (the minimum NAMA threshold exposure for AIB and Bank of Ireland is still €20m)

Remember that there is a regularly updated spreadsheet showing all of NAMA’s receiverships maintained under the Developers TAB, or directly accessible here

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Irish Minister for Finance, Michael Noonan signalled yesterday in the Dail that the attempted renegotiation ofIreland’s IMF/EU bailout deal had effectively come to an end, withFrancevetoing any easing of the interest rate charged without a specified quid pro quo : an increase in Ireland’s corporation tax rate. Minister Noonan, with what seemed like a flash of anger as much as resolve, made it clear that the existing corporation tax arrangements were vital to Ireland’s future, not least our ability to repay debt. And he was not going to bargain that away for a reduction in interest rates which might only be worth €148-200m per annum.

Of course, France’s stance is a little curious. Not only does France have an effective tax rate of 8.2% (compared to Ireland’s effective rate of 11.9% – the headline rates are higher of course, 33.1% in France, 12.5% in Ireland); but France is also insisting that Greece reduce its corporation tax rate by 1% per annum between now and 2014. That’s reportedly part of the new austerity and privatisation package that will be unveiled before the Greek parliament and nation later this week. Okay, Greece’s current rate is 23% and the new measures will bring rates down to 20% over four years, but curious that in the south of Europe, France supports a cut in corporation tax rates but on the western periphery wants to see an increase. Curious. The view on here is that like that line from the Godfather “but I didn’t know until this day that it was Barzini all along”, we will eventually find that it is Germany that has the most influence in the attack on our corporation tax arrangements. But regardless, for now at least France is being a little schizophrenic.

So sadly then, the renegotiation of the bailout terms has effectively ended. No burning of senior bondholders (despite support from the IMF), no extension of the time to repay debt (which would not have financially cost our creditors anything) and now no reduction in the penal interest rates on our bailout which will see the EU profit to the tune of about €7bn from our misery – by profit, I mean that the EU sources our bailout funds for 2.8% and charges us 5.8-6%+. In the words of British MEP, Sharon Bowles it is “outrageous”. But we are not children and we agreed to the bailout deal, and it was approved in parliament. So although it might be unfair and might be an affront to the concept of European solidarity, perhaps we need man up and accept the terms.

Of course, solidarity is a two-way street. And in a few weeks time, it seems that a new EU bailout will be needed for Greece, Greece that received a 1% reduction in its bailout interest rate in March 2011 despite failing to follow the bailout agreement negotiated in May 2010, Greece that steadfastly refuses to reform its economy and tackle its primary deficit in the way agreed with the IMF and EU, Greece that apparently lied about its financial condition, Greece that received almost €400m from Ireland last year.

So what will Minister Noonan do when his approval is sought for a second bailout later this month? Will Minister Noonan use his veto to demonstrate the outrage felt in Irelandat the lack of solidarity in Europe, at the hypocritical stance of France, at a Europe that is hugely profiting from Ireland’s misery, at a Europe that seems relaxed at Greece failing to reform its economy and even rewarding it with a lower interest rate? Solidarity is indeed a two-way street. And unlike former US president Bush, our own Minister for Finance is a highly articulate man and can explain in clear terms to our partners in Europe that certain countries should be ashamed of their stance which undermines solidarity and thatIreland will not be fooled into yet more measures without a quid pro quo. And by the way, when was it accepted that a 1% reduction in interest rates was the ultimate goal, surely the goal should be to get the funds at cost, that is, to secure a 3% reduction. And that the reduction would apply to all funds including those already received. Indeed since the funds are being used to repay private bondholders throughout Europe, there is a case for arguing the bailout should be below cost.

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