INSIDE THE WORLD OF BUSINESS:THE NATIONAL Treasury Management Agency (NTMA) dips back into the market for its monthly bond auction next Tuesday in what will be the third of its 11 scheduled bond auctions for 2010. So far, so routine.
However, investor sentiment towards this bond auction will be watched more closely than ever, for this NTMA fundraising sojourn, as Bloxham economist Alan McQuaid pointed out yesterday, is the first since Brian Lenihan revealed the full extent of the banking recapitalisation horror.
The NTMA’s search for a further €1.5 billion in borrowings to keep the wheels of the Irish economy turning also comes at a particularly sensitive time for bond markets across Europe. A potential domino effect from the ongoing Greek bailout drama cannot be completely ruled out.
The NTMA plans to auction two bonds, one priced at 4.6 per cent maturing in 2016 and another 5 per cent bond maturing in 2020.
To date, the NTMA has had little trouble in raising the cash it needs, with oversubscriptions the order of the day: the March €1.5 billion bond issue attracted expressions of interest worth €4.9 billion.
McQuaid believes the April auction will again see “solid demand”, despite the impact of the Greek saga on euro zone “peripherals”. Investors agree with the political perception that Ireland has taken steps to address its budgetary difficulties. As a result, he notes, Irish government paper is now traded as a “must have” within the “peripheral” market.
In the year to date, the NTMA has already raised €10.2 billion, or just over half of its €20 billion bond issuance programme for 2010. Next Tuesday is likely to see it move closer to the finishing line. But it will no doubt be interesting to note if interest in the bonds is as strong as it was pre-recap.
The Government now desperately wants Ireland to shed its “peripheral” status and move back towards the “core” European economies. Such a shift may have already begin, but it probably won’t be completed until the NTMA no longer has the need to raise 11-digit numbers to keep Ireland Inc – plus Anglo Irish Bank et al – ticking over.
Paper chase back on
HERE WE go again? Denis O’Brien’s latest foray into Independent News Media shares holds out the prospect of a replay of the slow-motion – and ultimately futile – battle for control of the group that took place in 2007 and 2008.
The credit squeeze and subsequent debt crisis at INM saw both O’Brien and his rival Tony O’Reilly diluted from positions of real strength back down to 14 per cent in a debt for equity swap.
O’Brien would appear, however, not to have given up and is slowly creeping up his stake, crossing 18 per cent this week. The O’Reilly camp’s response is awaited and the belief must be that they will be unlikely to let O’Brien steal a march on them, even if its far from clear quite in what direction things are headed.
Sources close to O’Brien say that he is in the market for more shares provided bond holders are prepared to sell at realistic prices. But they stress he has no plans to take a tilt at the company and that comes as no real surprise.
A bigger stake might give O’Brien some influence, but for the foreseeable future the whip hand lies with the group’s banks.
Under the terms of the €745 million refinancing the banks can pull their support if any one shareholder or group of shareholders acquires more than 35 per cent of the company. O’Brien can buy all the shares he wants but unless he has access to a €745 million funding line he is going nowhere fast without the backing of INM’s banks.
Chips are up
WITH ECONOMIC commentators predicting that Ireland’s recovery will be export-led, this week’s signs of a rally in the technology sector is good news for Ireland Inc.
Chipmaker Intel, which employs about 4,000 here, was first out of the blocks with a pleasant surprise for the markets. It reported a 44 per cent surge in first quarter revenues to $10.3 billion – Wall Street had been expecting roughly $9.84 billion.
The world’s biggest chipmaker is seen as an early indicator of an upturn in the technology sector. PC manufacturers place their orders in advance of their own production so the figures bode well for the likes of HP and Dell who also have significant operations in this country.
Intel also revealed that it expects to add 1,000 jobs this quarter – news that may ease concerns over jobs at its Leixlip, Co Kildare plant which has not attracted new investment.
The technology rally is not just on the hardware side. Internet giant Google, which runs its European operations out of Dublin, where it employs over 1,500 staff, surpassed Wall Street expectations on Thursday night with a 37 per cent jump in first quarter profit to $1.96 billion. Google revealed it has been adding jobs but investors read this as a sign of poor cost control and drove the stock down 5 per cent.
With the tech sector employing over 80,000 here the results are a good sign that we will exit recession this year. With HP’s Lionel Alexander, a member of the Government’s Innovation Taskforce, criticising the lack of implementation of that report, it is essential we remain an attractive place to do business for such firms.
On Monday officials from the International Monetary Fund and the European Commission will be in Athens to begin talks on a bailout package for Greece
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