Tuesday 24 January 2017

First a feast, and then a famine as crisis hits

Nigel Cosgrave, Harry Leech and Nick Webb

Published 03/01/2010 | 05:00

It's been the decade of Facebook, frenzied growth and falling flat on our faces. It seems as if it was only yesterday that we were getting ready to party like it was 1999 and the world was due to implode as the Y2k bug was to take us back to the Stone Age. Nigel Cosgrave, Harry Leech and Nick Webb look back on a decade where the rich got very rich -- and then lost it all

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2000

THE decade started with a boom (or rather a fizzle) as the world woke up on January 1 with a hangover and a trillion-dollar bill for a Y2k bug that never happened.

No planes fell out of the sky, no power stations melted down, and the hysteria of '99 looked foolish in retrospect.

But the money lost on the non-event of the decade was mere pocket change compared with what was to come as the air began to drain rapidly from the dot-com bubble.

AOL and Time Warner merged in January amid much hype, Microsoft launched Windows 2000 and the tech-heavy Nasdaq peaked in March; by the end of the year the dot-coms became dot-bombs as hundreds of highly leveraged Silicon Valley start-ups collapsed, taking some old world companies with them.

US energy company Enron's share price peaked at $90 in August 2000.

In Ireland, the government promised to review the roles of bank auditors after the issues highlighted by the previous year's Dirt inquiry, and the taxi industry was deregulated in November.

Paddy Power was the biggest Irish name to go public, with a valuation of £100m.

2001

Minister for Finance Charlie McCreevy's SSIA scheme, announced in the 2000 budget, launched on May 1 amid much fanfare.

Eircom sold off Eircell, Ireland's first mobile operator, to Vodafone amid charges of asset stripping, and shortly afterwards a bidding war for Eircom itself broke out. The company was taken private by the Valentia Consortium for €1.35 per share, just a third of the flotation price paid by investors two years earlier.

Foot and mouth disease devastated the Irish agriculture and tourism industries. To prevent it from spreading, the Six Nations fixture versus England was delayed and the St Patrick's Day Festival postponed until May.

The website MyHome.ie was launched as a collaboration between a group of estate agents to promote the Irish property market.

The terrorist attack of September 11 resulted in the then single biggest one-day drop in the Dow Jones Industrial Average when markets reopened on September 17 and led to more than 140,000 redundancies in the US airline industry alone.

The business news of the year in the US was the collapse of Enron, where shares tumbled to less than a dollar after the uncovering of widespread fraud in the company.

2002

Euro notes and coins were launched on January 1 in 12 countries around the eurozone, including Ireland.

On February 9, the Irish punt was no longer accepted in businesses. Despite fears of confusion and hyper-inflation the transfer was, broadly speaking, a smooth one.

By the time the government's SSIA "scheme" closed on April 30, over 1.1 million Irish people had signed up.

Internationally, the dot-com bubble was estimated to have cost $5trn between March 2000 and October 2002. Time Warner dropped AOL from its title but insisted that it regretted nothing.

In Ireland, the steep rise in house prices that seemed to have slowed down in 2001 started to take off with an estimated rise of 14 per cent.

It was a gloomy year for international stock markets, which were not helped by the $9bn fraud uncovered at US firm Worldcom.

2003

First Active was bought by the Royal Bank of Scotland for €887m, one of the biggest Irish business deals of the year and a high-profile shake up of the Irish banking industry.

In the US, John Rusnak was sentenced to seven-and-a- half years in jail for a foreign exchange fraud that cost AIB's US arm $691.2m.

Ireland's oldest department store, Arnotts, was taken private by a consortium led by Richard Nesbitt, but drinks company Cantrell & Cochrane failed to float on the Irish stock exchange.

Comreg told Eircom to cut the price at which it allowed rivals access to its network, in an attempt to stimulate competition.

The property market continued to grow unabated, with a house in Dublin now costing approximately 10 times the average industrial wage, twice what it did in 1995.

In the US the Dow Jones Industrial Average peaked at a 19-month high in spite of the US invasion of Iraq.

2004

US lifestyle guru Martha Stewart was convicted of lying to investigators examining suspicious stock trades that she had made. She was sentenced to five months in a minimum security prison.

In Ireland the workplace smoking ban came into place in March, amid predictions of mass revolt by smokers. As it turns out the Irish are actually a compliant lot and, while pubs and restaurants suffered, workers could now work free of second-hand smoke.

The return of Eircom to the stock market contributed to a 26 per cent increase in the Irish stock market, as did the eventual flotation of C&C.

The dollar tumbled in value against the euro, hurting exports from the eurozone.

The Irish housing market continued its seemingly unstoppable upward spiral, rising 9 per cent and no doubt contributing towards CRH's reported €1bn profit.

2005

It was a year of audacious deals for some of the leading lights of Irish business.

The most sensational of these was Sean Dunne's €379m purchase of sites at Jury's Hotel and the Berkeley Court in Ballsbridge. Later, Ray Grehan outbid Dunne by paying a record-breaking €83m per acre for the Veterinary College site on Shelbourne Road.

Buoyed by the €7bn Jefferson Smurfit Kappa merger, Michael Smurfit bought the K Club with Gerry Gannon for €115m. It allowed him to build a €10m mansion at the Ryder Cup venue.

Horse-racing tycoons John Magnier and JP McManus played hardball with Malcolm Glazier over the Manchester United takeover and sold their 29 per cent stake for €120m.

Fyffes lost the first round of the insider trading case with Jim Flavin's DCC group. Meanwhile, the workers at Irish Ferries lost out in an ugly industrial dispute.

2006

In 2006, the conspicuous consumption of Celtic Tiger Ireland went into overdrive when the first batch of SSIAs matured. However, some made deals that they would later regret.

Sean Dunne continued his Ballsbridge expansion by buying half of AIB Bank Centre in a €378m leaseback deal. Liam Carroll wasted no time in snapping up Dermot Desmond's 22 per cent stake of Greencore.

Babcock & Brown became the latest owner of Eircom in a deal worth €2.36bn, while The Irish Times bought property website myhome.ie for up to €50m with the money it made from selling its former offices in D'Olier Street.

Internationally, markets became nervous about growth as more interest rate hikes were announced. Commodity prices rose sharply as investors sought safer havens.

As cash registers chimed throughout Christmas 2006, Bupa retreated from the Irish health insurance market over an enforced €161m equalisation payment.

2007

The Celtic Tiger started to feel the asthmatic effects of the credit crunch as the property boom began to fizzle out.

Initially, things seemed to be fine. Derek Quinlan bought the Jurys Inn division of the hotel group for €1.16bn. The Quinn group took over Bupa's operations -- and promptly filed court proceedings against the government over equalisation. Companies like Paddy Power, Kingspan and Elan were still doing well.

However, the first drop in house prices in five years was reported in April. The PDs called for an abolition of stamp duty, which only made things worse.

Then in August, Wall Street hit the skids after a spate of subprime mortgage defaults in America. This reverberated around the world, since these subprime mortgages had been packaged together and sold as triple-A-rated securities to nearly all the major financial institutions of the world.

For a country like Ireland, which had been bingeing on credit for years, the credit crunch would bring a period of cold turkey which would last way past Christmas 2007.

2008

Financial stories were box office in 2008 with the massive fallout from the global financial crisis.

Jim Flavin resigned after the decision in the insider-dealing case with Fyffes was reversed. Sean Quinn resigned as chairman of Quinn Insurance over an unauthorised €288m loan.

Despite the Government predicting modest growth and a deficit of less than €5bn at the start of the year, international and domestic financial markets took a hammering after Bear Stearns almost collapsed on St Patrick's Day.

In September, markets went into freefall when the US government allowed Lehman Brothers to go to the wall.

While the US pumped in $700bn to save its financial system, Brian Lenihan introduced a two-year unconditional deposit guarantee after the value of Irish banks plummeted by a third in one day.

Things got even worse when it was discovered that Anglo Irish Bank chairman Sean FitzPatrick had misled shareholders over €87m of loans made to him personally. He and David Drumm, Anglo chief executive, resigned just before the Government was forced to put €7.5bn of capital into the three big banks.

The year ended with the Government unsure as to whether it could rely on its own figures for the extent of the budget deficit.

2009

It was the year of the hairshirt -- and a borrowed one at that.

The banks dominated proceedings in Ireland as the State was forced to nationalise Anglo Irish Bank and then plough €7bn into rescuing AIB and Bank of Ireland. Brian Goggin, Eugene Sheehy, Denis Casey, Michael Fingleton and Mark Duffy all left their jobs as chief executives of banks. Most were replaced by insiders.

The National Asset Management Agency (Nama) good bank/bad bank debate seemed to go on for ever before being finally greenlighted, with the next couple of generations on the hook for billions of euro in loans to property developers.

Just two eggs were thrown at AIB chairman Dermot Gleeson at the bank's AGM in May.

Property prices continued to tank, and so did the state coffers. Suddenly we discovered that we had a deficit of more than €20bn. After years of kow-towing to the unions, the Government stuck it to them big time, with major public sector pay cuts as part of a savage Budget.

Carnage in the construction sector continued with Liam Carroll's empire the big casualty as foreign banks began to get snotty about being repaid.

Eircom was taken over for the zillionth time, with CRH ending the year as the country's most valuable company.

Sunday Independent

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