Inside the world of business

Deadlines not a capital idea  

THERE SEEMS little sense in forcing the banks to raise further capital by the deadline at the end of next month set under the EU-IMF plan when there is a further round of stress tests coming in March.

While the wave of deadlines set to fix the banks is in everyone’s benefit to get things moving, it is hardly practical to force through another recapitalisation deadline next month in light of a further Financial Regulator stress test on capital and a new one on liquidity.

This will be followed by another EU-wide stress test to recover ground lost to the widely discredited test carried out last July.

Bank of Ireland has raised €700 million out of a €2.2 billion bill to be cleared by the end of next month. Trying to raise from capital market sources when you have subsequent hurdles to clear sets the first obstacle even higher. The bank is eyeing a menu of options, some of which will generate more capital than others. They include a debt-for-equity swap and other sophisticated “liability management exercises”, a reduction in risk-weighted assets to bring about capital gains and a rights issue to tap shareholders, including the State, for more cash.

The aim is to keep the State’s interest – currently at 36 per cent – below a majority stake. The bank and its chief executive Richie Boucher are working frantically to meet the end-of-February deadline rather than trying to argue for an extension or derogation. This is typical of Boucher’s response to the crisis over the past two years. Don’t argue with the guys calling the shots – just work to meet the targets they set you. Still, it would make sense to roll the various deadlines into one so the banks don’t have to go back into the markets again and again.

The banks also have to set out an asset disposal plan by the end of April to shrink themselves so they can stand on their own. Surely a clever idea would to push everything out to April as these deadlines are related and would be complementary from the perspective of credibility – something that has run dry at the Irish banks.

What chance of a Mallow sweetener?

TO ADAPT a quote from WB Yeats: Irish Sugar is dead and gone, it’s with O’Leary in the grave.

But what about the 160 hectare site in Mallow that has been lying idle since Greencore closed the factory in 2006?

At an Oireachtas committee meeting yesterday, Labour’s Seán Sherlock, a former mayor of the north Cork town, asked Greencore boss Patrick Coveney what would become of its proposed €500 million Mallow West commercial and residential development for the former Irish Sugar factory.

“It is unlikely that the development of Mallow West will happen as per that plan,” Coveney said. “Circumstances have changed.”

That’s putting it mildly. Much of the site is currently being used to produce silage.

Fianna Fáil’s maverick Cork-based deputy Ned O’Keeffe, who once had a “small [sugar] quota”, supported Coveney’s view that sugar production here was no longer viable.

He also offered Coveney his best wishes as Greencore pursues a merger with UK-based Northern Foods to form a new entity called Essenta.

Is there any chance that Essenta might locate a factory in Mallow to compensate the town for the loss of Irish Sugar, O’Keeffe enquired.

“I hope it will happen but it’s not entirely in our hands,” Coveney said diplomatically of the proposed merger, which he hopes will help make the business into a FTSE 100 player.

“That will unfold over the next few months.”

Greencore’s chances of consummating a deal will become clearer tomorrow when rival Ranjit Boparan has to make an offer for Northern Foods or walk away.

O’Keeffe’s interest was more than professional. The latest register of members’ interests shows he owns shares in Greencore.