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Archive for April 22nd, 2013

ExtensionHearing

I was looking forward to sitting down with the crudités and dips on Friday and devouring the Sean Dunne statement of financial affairs which is due this week, but a filing at the bankruptcy court last Friday – reproduced in full above – might presage an application for a further extension of time, or some other request, conceivably around the privacy of the filing.

The reasons for the great expectation awaiting Sean’s filing of his statement of financial affairs, are manifold. Sean says in his original filing on Good Friday that he has assets of USD 1-10m and liabilities of USD 500m-1bn, and given Sean’s activities in Ireland and elsewhere we wanted to see the extent of his empire. NAMA has already reviewed Sean’s statement of financial affairs provide to it in 2010, and no doubt NAMA will want to compare the two versions.

On Friday last, Sean’s lawyer, the award-winning James Berman requested a hearing with the judge on the previously filed application to extend the deadline for filing Sean’s finances. That previous application was accepted and the new deadline was the end of this week, so what does Sean want from a hearing. Does he want a further extension? Let’s hope he doesn’t want his statements to be kept private.

There has not been any further filing in the case, so we don’t know if the judge has acquiesced to the request for a hearing. NAMA is a notice party in the case so if there is a hearing, it may want to attend.

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To date in (the Republic of) Ireland, it seems that the only swap mis-selling case to have been settled was the David Agar versus Ulster Bank case which was reported last summer. At least two sets of claims, both against Ulster Bank, are meandering through the court, reported here and here.

 And at the start of April 2013, a Dublin couple initiated what is believed to be the first swap mis-selling case against AIB.  The case reference is 2013/3521 P. The case was mentioned last week at the Commercial Court division of the High Court. Robert Madden and his wife Rosaleen are reportedly suing AIB over what is reported to be a €45m swap product. They are being represented by Dublin 2 solicitors, Downes who are carving out quite a niche with these cases, being the solicitors on record in the two Ulster Bank cases referred to above.

Just to remind you, interest rate swaps are products which banks sell borrowers which provide insurance against interest rate increases eg if you borrow €100m when the interest rate is 5% you might buy a swap to protect you if the interest rate rose above 6%, but when interest rates reduced, the borrower had to pay the bank, and with the main ECB rate at 0.75% these payments are huge.

In the case of the Madden couple and their case with AIB, they claim they are paying €1.3m per annum in additional payments to AIB for these swap products. The Maddens are reportedly claiming the swap products cover longer periods that the term of the loans and that they seemingly didn’t know or understand that they had been sold a swap product by AIB. The redoubtable Judge Kelly has agreed to fast track the case.

AIB is being represented by Alfred Thornton and Company.

The view on here is that, with the reluctance of the Central Bank to investigate swap misspelling and to put a general scheme of compensation in place, there will be a steadily-increasing trickle of these cases. In the UK, some €2bn has been refunded to borrowers to date. You will a feature blogpost on swap mis-selling here.

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PGSCourt

The Irish Independent today reports on the sale of a property in England – you can read the “what” here. The property is called “PGS Court” and is located in a town called Walton-on-Thames which is a few miles outside London. It is a 31,000 sq ft office block on 1.6 acres and you can see an advertisement for the building in 2009 here. There are two players in this story. Firstly, there’s the Dunner himself, Sean Dunne who has recently filed for bankruptcy in Connecticut. And secondly there is Michael Fingleton junior, the 31-year old son of the former CEO of Irish Nationwide. Here’s the chronology, money is shown in sterling (GBP)

1999 Sean Dunne buys the property for GBP 9.3m

2012 (January) Sean sells the property for what the Independent says was “half that sum [GBP10m]” or GBP 5m. It is unclear who Sean’s estate agent was, but in 2009, it was being marketed by a small firm of estate agents, Quinton Scott, based in Wimbledon, south west London

The buyer appears to be an Isle of Man company called Kulio (IOM). However, another company, Hibernian Capital Limited incorporated in the UK and whose sole director is Michael Fingleton junior, has been described as the landlord of the building and according to the Independent, “his name appears on planning application documents” relating to the building.

2013 (February) Hibernian Capital leases the building to Kia Motors on 15-year lease. Hibernia was reportedly represented by Quinton Scott. Kia was represented by Savills.

2013 (April) Michael Fingleton junior is now selling the property with asking price of GBP 12.3m (selling agents reported to be Savills)

The reason this transaction is of direct interest to you is that the sale in 2012 was, according to the Independent, at the behest of creditors, namely Bank of Ireland which we 15%-own and in which we have €1.5bn of preference shares, and Bank of Scotland.

Of course the GBP 12.3m now reported is an asking price, but does anyone else think that it is a remarkable increase in 14 months, from GBP 5m to GBP 12.3m? According to IPD, commercial property generally in the UK has declined by 3.8% in the past 12 months.

Sean Dunne had a long standing relationship with Irish Nationwide. According to the Richard Curran special on RTE in February 2013, Sean owed Irish Nationwide €131.5m in December 2006.

If the Independent article is correct, particularly as regards the sale price last year and the asking price now, surely Bank of Ireland should be asking how the building has more than doubled in value in the space of 14 months.

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“Recession: The commonly accepted definition of a recession in the UK is two or more consecutive quarters (a period of three months) of contraction in national GDP” HM Treasury glossary of terms

Ireland is back in recession.

We know that because the latest figures show that real GDP declined in the third quarter of 2012 compared to the second quarter and that the real GDP declined in the fourth quarter compared to the third quarter. The generally accepted definition of a recession is two consecutive quarters in which GDP contracts compared with the immediately-previous quarter.

The latest figures from the Central Statistics Office on 21st March 2013 show that in Q2, 2012 our real GDP* was €40,209m, in Q3, 2012 it was €40,045m and in Q4, 2012 it was €40,026m. The CSO reported the decline in Q3 as -0.4% and in Q4 as 0.0% though in Q4 it was really -0.047%. But here you have two consecutive quarters of decline in real GDP.

Why didn’t RTE refer to the recession-word in their reporting? I don’t know and I asked both David Murphy and Sean Whelan at RTE on Twitter if Ireland had slipped back into recession. Neither replied.

I also asked the BBC’s Jim Fitzpatrick the same question on Twitter who replied that yes, Ireland had slipped back into recession on the basis of its recent GDP statistics.

RTE is under constant attack from all sides about its partiality, and there may indeed be partiality in individuals but I think as an organization RTE is reasonably independent. The opinion on here is that the R-word is provocative and the fact that to one decimal place the figures in Q4,2012 were flat, gave RTE the cover to avoid the provocation. Remember on 21st March 2013, An Taoiseach Enda Kenny was in the USA selling the Irish comeback story, and if the national broadcaster back home was reporting a recession it would have pulled the rug from beneath him. And on the other hand, who would be upset if RTE didn’t use the R-word?

Outside RTE, much of the old media is teetering on the brink of collapse and desperate for more advertising spend and better circulation. So a headline with the R-word would just depress confidence and spending, and again, who would it upset if the R-word wasn’t used?

In the Dail last week, the Minister for Finance Michael Noonan was asked if Ireland was back in recession. It seems like a straightforward question and with two quarters of contracting GDP, it would seem equally straightforward to provide a clear answer. The response was hardly clear, though the Minister did acknowledge two quarters of contraction.

Now, it should be said that a conclusion of “recession” is regarded by some as requiring a wider analysis than just real GDP. Unemployment, retail sales, manufacturing, construction, exports are regarded by some as areas to be considered before concluding there is a recession.

The concern on here though is that we are soft-soaping the reality of our position, we still have a 7% deficit which is forecast to reduce to 2% in 2015 and this may not strike some as serious given our progress in reducing the deficit to date, but just look at our neighbours in the UK, they have a deficit forecast for 2013-2017 at 6.8%, 6.0%, 5.2%, 3.5% and 2.3%. We face an immense challenge, and ignoring the fact that we are back in recession is not helpful to honestly tackling the challenge.

The parliamentary question and reply are here:

Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm that the economy is back in recession; and if he will make a statement on the matter.

Minister for Finance, Michael Noonan: The most recent data show that GDP contacted by -0.4 per cent quarter-on-quarter in the third quarter and by -0.0 per cent in the fourth quarter. In relation to the fourth quarter figure, the decline was very modest, and does not show up at the first decimal point.

Importantly, the same statistical release shows that domestic demand stabilised in the second half of 2012, with growth in consumer spending for the first time since 2010. The data-flow in recent months have also been positive on the domestic front as core retail sales have now been in positive territory in year-on-year terms in each of the last seven months. In addition, labour market data show increases in employment in the second half of last year.

My Department forecast GDP growth of 1.5 per cent for 2013 at Budget time. The main downside risks to this forecast remain beyond our control and relate to the external environment as well as some sector specific issues. Since then, a second successive year of negative growth has been forecast in the euro area given the simultaneous deleveraging and consolidation under way in so many euro area countries. A more prolonged downturn in our key international markets would negatively impact upon our export performance. Such a prolonged downturn could arise from a more protracted period of deleveraging or from any re-ignition of the sovereign debt crisis in the euro area.

My Department will publish revised forecasts at the end of April, taking into account all available information. [ENDS]

*real GDP referenced to 2010 and seasonally adjusted

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General
We MAY get NAMA’s management accounts for Q4,2012
Monday 22nd April 2013
CSO Govt Finance Stats Annual Results 2009-2012 (April 2013)
CSO Govt Finance Stats Quarterly Results 2009-12 (Apr 2013)
Tuesday 23rd April 2013
10th Troika review mission starts, scheduled to last 2 weeks
Punchestown festival starts, ends Saturday
Wednesday 24th April 2013
3pm IPD Irish commercial property index for Q1,2013
2pm Fiscal Advisory Council at Oireachtas finance committee
Bank of Ireland AGM Dublin
Thursday 25th April 2013
CSO Livestock Slaughterings March 2013
CSO Residential Property Price Index March 2013
CSO Wholesale Price Index March 2013
Former minister & senator, Ivor Callely at Dublin district court
Friday 26th April 2013
CSO Retail Sales Index Mar 2013 (Provisional) Feb 2013 (Final)
Saturday/Sunday
27th April 2013 is the revised deadline for Sean Dunne to file
his financial statements in his bankruptcy case in Connecticut

 

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