Archive for December 14th, 2011

As we count down the days to Christmas, we probably become more sensitive than usual to the plight of our fellow man. And so the story coming out from Cork of workers not only facing redundancy at this of all times of year, but that they may not even receive their redundancy entitlements, strikes a particular chord. NAMA is being portrayed as a Scrooge character and the case has now attracted the attention of politicians and unions.

Vita Cortex is a company based on Kinsale Road, Cork city which manufactures foam products for a range of industries including bedding and furniture, packaging and aircraft. History of the company and product range is here . In September 2011 it announced it intending to shut Vita Cortex down on 16th December, 2011 – about 33 employees are to lose their jobs. Which is sad enough, but Vita Cortex apparently doesn’t have the funds to pay the €1.25m redundancy bill which compounds the tragedy.

So where does NAMA come into this? NAMA is understood to have a charge over the building from which Vita Cortex operates but is otherwise unconnected with Vita Cortex and NAMA had no involvement in the redundancy decision. The Vita Cortex building is associated with developer Jack Ronan, said to be the cousin of Treasury’s Johnny. What NAMA does have, is a lien over cash deposits held by a separate company controlled by Jack Ronan, and it is claimed those deposits come to a total of €2m.

So the SIPTU union and local politician Ciaran Lynch have gotten involved. As they see it, it is NAMA which is holding onto cash in one Jack Ronan company which could be used to pay for the workers’ redundancy in another. For its part, it is understood NAMA regards the cash in a separate company as being unrelated to the needs of Vita Cortex, and that these funds should be used to further NAMA’s objectives of returning as much cash as possible to the Nation.

A tragic situation for the workers, but it seems understandable why NAMA is keeping out of it.

UPDATE: 15th December 2011. Quite rightly the Vita Cortex story has become national news – redundancy the week before Christmas is particularly harsh.  RTE covered the story this evening here. However the claim by RTE that the 32 workers (reported as 33 and 40 elsewhere) will not get a cent tomorrow is misleading in the sense that the workers should be entitled to statutory redundancy payments (2 weeks per year of service plus one week) which should be paid by the Social Insurance Fund administered by Joan Burton’s Department of Social Protection. The RTE news report showed the heartbreaking scene of one employee with 47 years service – that is, he will have worked at Vita Cortex since leaving school – describing his feelings with a dignity you don’t often see these days. According to the latest rates, he should be entitled to €57,000 if his pay is more than €600 per week. Hopefully the Department of Social Protection will do its work quickly and efficiently and ensure the workers receive their statutory allowance as soon as possible.

UPDATE: 17th December, 2011. Although the workers (put at 32 in some reports, 33 in others and 35 in the Irish Examiner) were indeed made redundant yesterday and reportedly received one week’s additional pay, they have not received anything else at this stage and are presumably now making claims on the Social Insurance Fund for their statutory redundancy (two weeks per year of service plus one week multiplied by their weekly wage subject to a weekly wage maximum of €600). The workers have reportedly staged a sit-in at the plant and Fianna Fail leader and Cork TD, Micheal Martin has visited the workers. Representatives of the workers were reported to have met NAMA on Thursday but as regards the €2.5m in a deposit account, it remains the case that this is in a separate company and the only commonality between the companies appears to be Jack Ronan, so lawfully it seems this money is beyond being used to pay redundancy. The Irish Examiner reports that the Vita Cortex workers have 900 years of service between them which would imply a statutory redundancy bill of €1,100,000 (900*2*600 + 32*1*600).  The claim by the workers for redundancy on the company is said to be €1,250,000 so this dispute seems to be about the timing of the payments – the workers might be waiting six months for the Department of Social Protection to pay them from the Social Insurance fund – and €150,000 (the difference between the statutory redundancy and the actual redundancy claim).

UPDATE: 20th December, 2011. It’s Day 5 of the sit-in (pictured here) at the Vita Cortex facility on Kinsale Road in Cork city  as workers laid off last Friday say they will continue to occupy the facility until they receive redundancy pay. At least three politicians have now gotten involved, Ciaran Lynch first followed by Micheal Martin and Jerry Buttimer. It is reported that Jerry Buttimer spoke with NAMA yesterday and that NAMA’s CEO Brendan McDonagh reiterated the Agency’s position: that the famous €2.5m belongs to another company related to Jack Ronan and is securing loans which NAMA has now taken over and that NAMA had no hand in the decision to close the Vita Cortex facility. It is reported that the Managing Director of Vita Cortex is today meeting with NAMA. Vita Cortex’s financial status is unclear – it is reported in today’s Irish Times , quoting TD Ciaran Lynch, that machinery is being transferred from the Cork facility to “another factory in Athlone” . Separately Ciaran Lynch issued a statement on Thursday last demanding an investigation by NAMA  into Vita Cortex’s finances.

UPDATE: 26th December, 2011. The sit-in by the 32 continues with shifts of 12 former workers normally maintaining a presence at the facility at any one time. SIPTU has been active in this matter, with local representative Anne Egar involved at an early stage and on Saturday, the SIPTU president Jack O’Connor warned that SIPTU workers at other locations across the State would be mobilised in the New Year if the workers remained without compensation payment.  Possibly of more significance it was reported that the workers were offered €1,500 each as a downpayment on any eventual redundancy settlement from the Social Insurance Fund, with a condition that they allow certain plant and machinery to be removed from the plant. The €50,000 offer (32 workers * €1,500) was rejected. The offer was reportedly made by Vita Cortex and the financial condition of that company remained unclear, and clarifying that financial condition would seem the most constructive way forward – if the company doesn’t have the financial wherewithal to pay the redundancy – and the source of the €50,000 above needs to be clarified as does NAMA’s involvement which seems confined to another company under Jack Ronan’s control that has property related loans – then all effort should be made to expedite payments from the Social Insurance Fund. While the workers are sitting-in in Cork, they are not available for work or able to start other jobs which ultimately doesn’t seem very constructive if there is in fact no money available at this point. The workers have set up a Facebook page here. Lastly there was a Christmas mass said on the site, which the Irish Examiner recorded, part of which is available here.

UPDATE: 21st January, 2012. It is being reported that NAMA is having discussions with Jack Ronan to see if NAMA might release cash to fund the redundancies in return for Jack Ronan pledging an asset of equal value to the cash with NAMA. The net cash needed from NAMA is about €500,000 as Vita Cortex can get a 60% refund on redundancy payments. So the question involving NAMA is whether Jack Ronan can produce an unencumbered asset worth €500,000.

UPDATE: 23rd January, 2012. Not that it will help the Vita Cortex workers, but the head of the Labour Relations Commission which last week oversaw unsuccessful talks between workers and Vita Cortex management has exonerated NAMA from fault in matter. According to the Irish Examiner  Kieran Mulvey of the LRC said “it is not for NAMA to give the nod, it is for the beneficial owner of Vita Cortex. NAMA have to be careful that they also, in their circumstances, are not diluting assets to the benefit of someone who is in NAMA and who probably, privately, has the capacity to pay” So it seems the ball is now in Jack Ronan’s court, or if he fails to personally step up to the plate, it seems the workers will have to wait 6-12 months for statutory redundancy which has apparently been applied for by the company.

UPDATE: 2nd February, 2012. It is reported that the workers at Vita Cortex are expected to receive their statutory redundancy payments from the Department of Social Protection’s Social Insurance Fund in what seems like a record of just two months. The sit-in and protest is set to continue as the workers continue to demand the additional 0.9 weeks per year of service that it is claimed was promised to the workers and which was paid in the case of previous redundancies at Vita Cortex. There was also a protest this week outside the homes of Jack Ronan at  Orchardstown Stud farm at Lisronagh, outside Clonmel in Co Tipperary, and of former chairman, Sean McHenry, in Douglas, Cork.


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Back in April 2011, it was reported on here that NAMA was recruiting “forensic managers and analysts” to examine the finances of the Agency’s debtors, the developers. These were to be NAMA employees though it is not clear how many, if any, NAMA eventually employed. Today NAMA issued a tender for the appointment to a panel of for the provision of “Credit Verification Services” which seems to indicate NAMA is ramping up its efforts to track down assets of its developers.

The full tender document is here but here are the headlines:

Interested companies should have expertise across ALL of the following jurisdictions :France,Germany,Ireland,Portugal,Spain,UKandUSA. The competencies required are “asset tracing and investigation services” and “financial forensic investigation” and “computer technology”. Contracts are for 2-4 years.


And here’s a bit more detail on the services required:


Asset tracing investigations

Develop appropriate strategies to identify and locate assets locally and worldwide. Assets may be real or intangible properties and may be held in offshore vehicles and/or in complex corporate structures.

Identifying, gathering and analysing information from public and discreet sources to provide a greater understanding of a debtor’s assets and interests and to inform the overall credit management strategy.

Specific services that may be required to perform an asset tracing investigation include but are not limited to:

• Review of publicly available data sources and asset registers (including property, corporate and lifestyle registers).

• Review of corporate information obtained through public records searches including audited accounts.

• Conduct enquiries into lifestyle, social and business activeties of debtors.

Financial forensic review services

Apply investigative know how and forensic accounting skills to:

• Understand and analyse available financial and banking data to ensure full understanding and visibility on a debtor’s credit standing.

• Understand multi-layered complex personal, corporate and trust structures. In particular, provision of the following services may be required:

• Review of company books and records including bank statements and primary ledgers.

• Conduct interviews with company management and professional advisors including the debtor’s advisors. The Provider shall document all such meetings.

• Provision of expert witness reports.

• Computer forensic techniques to support investigations.

• Provision of any other forensic/corporate intelligence services ancillary to the above that may be required by NAMA from time to time.

And just to cheer everyone up, here is the picture again that accompanied the blogpost in April.

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Today sees the publication of the November 2011 IPD Monthly Property Index for the UK. The IPD (Investment Property Database) index is the only UK commercial index referenced by NAMA’s Long Term Economic Value Regulations (Schedule 2) and is used to help calculate the performance of NAMA’s “key markets data” shown at the top of this page.

The Index shows that capital values were flat in November 2011 and indeed prices have been more or less flat for over a year now. Prices reached a peak in June 2007 and fell steadily until August 2009 when the current rally started. Prices then increased by 15% in the year to August 2010 but since then prices are up a measly 2.0% and in six of the last 12 months the monthly increase had only been 0.1%. Overall since NAMA’s Valuation Date of 30th November, 2009 prices have increased by 11.5%. Commercial prices in the UK are now 34.1% off their peak in June 2007. On an annual basis prices are up by 1.6%. The NWL index is remains 831 which means that NAMA needs to see a blended increase of 20.4% in property prices across its portfolio to break even at a gross profit level (taking into account the fact that subordinated bonds will not need be honoured if NAMA makes a loss).

The table below shows the change in value of an index set at 100 at 30th November, 2009 and applying the month-on-month % increases in a compound manner.

The outlook for UK commercial property looks unclear, which is hardly surprising as the outlook for the UK economy generally is uncertain. Europe generally is trying to get to grips with the aftermath of the UK decision to veto a new EU treaty last week, with many UK domestic commentators suggesting the UK economy has been placed at greater risk by the move. Others suggest that the veto will safeguard the UK’s vital financial services sector. All seem to agree theUK’s actions are historic.

Economic growth in 2011 in the UKhas been subdued and an annual outturn of +0.9% is expected for GDP according to the Chancellor of the Exchequer, George Osborne’s Autumn Statement issued late November. Since 2007 the UK has committed to a programme of Quantitative Easing (printing more pounds) totaling GBP 295bn or 20% of its GBP 1.5tn GDP and inflation has been a feature of the UK economy since 2007 – CPI inflation has increased by 15.4% between June 2007 and November 2011. The latest forecasts for UK CPI and RPI inflation are for 4-5% in 2011 which will fall in 2012 but stay over 3% before falling to 2.3% in 2013. Despite the travails of the EuroZone and US economy, sterling exchange rates have remained highly stable in the past 12 months. The UK’s base interest rate has been 0.5% since February 2009 and the outlook is subdued despite the hefty inflation.

The UK has a large number of commercial property markets across Northern Ireland, Scotland, Wales and England. The Financial Times reported over the weekend that approximately one half of all NAMA’s assets are located in London.

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