Inside the world of business
IFSC group's access to the powers that be
The Government’s decision to lift the veil of secrecy around the IFSC Clearing House Group is a welcome development, if only to show the very technical discussions that take place at the group’s meetings.
The group, which is chaired by the State’s most senior civil servant, Martin Fraser, comprises representatives of the financial services industry and senior officials from the Departments of the Taoiseach and Finance and the Central Bank.
Minutes of eight meetings of the group between March 2011 and June 2012, seen by The Irish Times, show the extent of the influence that the international financial services industry has over senior figures from the Government authorities.
For the most part, the discussions at the meetings were rather technical in nature, focusing on the Government’s strategy to grow the IFSC, how the industry was marketed internationally, particularly in the face of a dire domestic banking crisis, and tax policies for the sector.
The minutes show that representatives from different parts of the industry had unparalleled access to State officials on what could improve the sector to attract more business.
The obvious conclusion to draw from these meetings is why the pharmaceutical, technology, farming or vintner sectors are not offered the same remarkable lobbying opportunities to sell their wares to State officials who could help them through changes in policies.
The Government has defended the existence of the group and the access that the authorities offer the financial services industry by saying that it has grown to employ 33,000 people and contributes more than €1 billion annually through corporation and payroll taxes.
But surely other industries are equally important in terms of the number of people they employ and the taxes they generate?
It is hard to see how, in tough economic times, the Government can offer greater access to one industry over another.
Advisers in stampede for debt business
After much foot dragging, it looks like the Personal Insolvency Bill will finally come into force early in the new year, offering those who are up to their necks in debt with a potential solution to their problems.
Cue a stampede by financial advisers to get a licence to advise debtors about the potential solutions available to them when the Bill is enacted.
One of the first out of the blocks this week was accounting firm Grant Thornton, which plans to establish a specialist division to offer a “debt solution” service once the Bill has come into force.
Three non-judicial debt settlement arrangements are proposed along with a major reform of the existing bankruptcy regime.
Grant Thornton partner Michael McAteer said the service would be available to all, regardless of their level of indebtedness.
The average fee for a similar service offered by Grant Thornton in the UK is about £5,000 (€6,140) over five years.
Grant Thornton’s sister firm in Britain has form in this area, being one of the top personal insolvency practitioners, with 250 staff and 44,000 active cases.
It invested about £5 million establishing an administration and processing facility in Belfast, which will be available to handle cases in the Republic too.
The intention is to hire about 10 client service managers initially. Typically, they will meet debtors in their homes and formulate a proposal to help them address their debt problems.
Ironically, many of the these managers will be former bankers. It’s a funny old world.
Boost for McKillen in Maybourne saga
It has been a good week for Paddy McKillen, who appears to have fought the Barclay brothers to something of a standstill at the Maybourne Hotel Group.
The key breakthrough seems to have been winning the approval of his main banker, Irish Bank Resolution Corporation, to in effect take on further borrowings from his Qatari partners to fund his share of the coming rights issue at the hotel group and preserve his interest. McKillen’s share of the rights issue will be in the region of €62 million.
Convincing IBRC to allow a weakening of its security of this magnitude could have been no easy feat given the bank is in rundown mode and given the general antagonism towards the notion that it would continue banking property developers.
IBRC has always argued that it has more to gain in the long run by supporting McKillen in his battle to retain control of the hotels, but one suspects that it was the substantial inroads McKillen has made into reducing his exposure to the bank that tipped the balance.
McKillen’s spokeswoman said last night that he had cut his corporate borrowings from IBRC from €600 million to
€550 million. This has been achieved by refinancing many of his assets, and another €200 million is due to be sliced off his loans shortly. His personal borrowings have also be reduced to less than €260 million from a reported €300 million.
However, despite this week’s events, stalemate will most likely ensue at the group post the rights issue, with McKillen owning 37 per cent while the Barclays own 28 per cent and have control over Derek Quinlan’s 36 per cent.
How the deadlock will be broken is unclear but McKillen’s best bet is that Quinlan’s financial difficulties finally overwhelm him.
If he is forced to sell his shares, then pre-emption rights kick in and McKillen – with further support form the Qataris and IBRC’s blessing – should be able to take his stake to 56 per cent.
However, the Barclays will still remain significant minority shareholders at 44 per cent and, given recent events, it is hard to see them kissing and making up with McKillen. As a result the company risks being damaged by continued boardroom warfare.
The most likely outcome is that one or other party will move to buy the other out at that point. Perhaps the real question in all of this is why – given the events of last week – they don’t start that process now.
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