Business Irish

Thursday 19 October 2017

Why the light at the end of the tunnel is an oncoming train

Nick Webb

Nick Webb

Anglo Irish Bank was the lightning rod for misery. Chairman Sean FitzPatrick, chief executive David Drumm and non-executive director Lar Bradshaw all bit the dust after revelations of FitzPatrick's loan arrangements.

Another who'd want the year to end quickly is Fermanagh cement-to-pub tycoon Sean Quinn. Ireland's richest man may no longer be Ireland's richest man after making a right cock-up of 2008. In quite possibly the worst investment of all time (by an Irish billionaire), Quinn and his family built up a 15 per cent stake in Anglo Irish Bank. Doh! Shares fell from almost €11 to 12¢ in the year.

If that wasn't bad enough, Quinn was forced to step down as chairman of his insurance firm Quinn Direct and was fined a record €3.4m by the regulator after it failed to reveal details of inter-company loans.

The banks were poleaxed by the credit crunch, spiralling bad debts and the stock market crash. In January, the combined shareholdings of the chief executives and chairmen of the AIB, Bank of Ireland, and Anglo Irish Bank were worth about €74m. Those shares are now worth about €2.8m. Of the bankers, Anglo's Seanie FitzPatrick took the biggest hit.

AIB spent €216m buying a 49 per cent stake in Bulgarian bank BACB just as emerging markets were about to be strangled by the credit crunch. That stake is now worth just €40m. Irish Life & Permanent invested almost €96m in debt issued by Icelandic banks. The banks went pear-shaped, with the possible recovery of this investment looking increasingly ropey.

And then there were the bad debts that everyone except the bankers saw. And what were the Central Bank and Financial Regulator doing while banking almost went down the plughole? At the end of the year the taxpayer was hit with a €7.5bn bill to rescue the banks.

Outside the jiggery-pokery at the banks, the biggest takeover of the year was one that never happened. Insurance group FBD was approached by Dutch insurer Eureko -- a move first revealed in the Sunday Independent. It is understood that Eureko was considering a €36 per share offer. FBD turned it down. FBD shares are now trading at less than €8. Management should have bitten Eureko's hand off.

Eircom's majority owner Babcock and Brown Capital had a truly rotten year. The share price at the mothership in Australia cratered over fears about its financial position. The Aussie group is holding a fire sale of some of its assets, and UBS has been appointed to examine the possibility if selling Eircom. It would be the fifth sale of the former State telco in a decade.

C&C boss Maurice Pratt resigned in a dignified manner after a series of blunders saw the cider firm's share price vapourised.

DCC boss Jim Flavin eventually fell on his sword after fighting a pretty spectacular rearguard action to keep his job in the wake of the Fyffes insider dealing case. Despite boardroom backing, Flavin's number was up when corporate watchdog Paul Appleby and the Irish Association of Investment Managers started dropping big hints that he should go.

Flavin's colleague at DCC, Michael Buckley, hardly covered himself in glory in 2008. Apart from supporting Flavin despite overwhelming opposition, Buckley backed another loser when joining the board of British sub-prime lending bank Bradford & Bingley. The bank imploded, with the board criticised for being asleep on the job as arrears rocketed. It was subsequently nationalised.

Buckley completed his hat-trick of corporate catastrophes while sitting on the board of Nicola Horlick's Bramdean Alternatives. The fund manager lost £21m invested with Bernard Madoff, the Wall Street asset manager who appears to have lost $50bn of client funds in what could be the world's biggest fraud.

The year was marked by a massive increase in high-profile mischief making. No sooner had Patrick Coveney taken the hot seat at food company Greencore than it emerged that £21m had gone walkabout at its Scottish water subsidiary. Auditor PwC was given the flick for failing to spot that the money was missing over several years.

December saw the start of a sensational court case involving south Dublin investment manager Breifne O'Brien, who was accused of operating a spectacular pyramid scheme. The court heard how he had allegedly admitted misappropriating €16m of client funds, some of which were used to fund his lavish lifestyle and keep his business afloat.

With the exception of cheapo supermarkets, retailers had an absolutely poxy year as sales fell off a cliff. And kept falling. An interim examiner was appointed to fashion chain Sasha, with a number of other retailers going to the wall. Superquinn was approached by a potential bidder, but hopes of a multi-million euro payout for its backers evaporated as a deal could not be concluded.

The National Pensions Reserve Fund stumbled from one snafu to another as its investments caused headlines for all the wrong reasons. Apart from owning shares in companies blacklisted for involvement in Sudan and Zimbabwe, the State sovereign wealth fund was also heavily exposed to US banks and French bank Soc Gen, which was flattened by rogue trader Jerome Kerviel, who dropped nearly €5bn on the markets.

Apart from the excellent chap who did my kitchen, builders and property developers had a miserable time. Unemployment rocketed to almost eight per cent, with dole queues swelled by breakfast roll man.

Administrators were called into Taggart Holdings, which is thought to owe the banks over €150m. Barely a week passed without a mid-sized construction or property firm pulling down the shutters.

Whatever about the residential sector, commercial property fell at least 30 per cent in value in both Ireland and the UK during the year.

With Irish investors ploughing €6bn into overseas property last year and the year before, it's going to be squeaky bum time for quite a few big-name punters as market values keep on tumbling.

Sean Mulryan axed staff numbers and cut his sponsorship of racing, Bernard McNamara incurred negative publicity over his withdrawal from a social housing PPP scheme. Sean Dunne's big-time punt on prime Ballsbridge land was looking very shaky indeed as his wheeze to build a massive skyscraper has hit planning problems.

Rock stars U2 saw plans for a massive tower down in Dublin's docklands crumble as the credit crunch led to countless construction projects being shelved.

The whole corporate entertainment sector came under the spotlight when the Sunday Independent broke the story of the Fas expenses scandal. The tax payer had funded luxury flights, junkets and slap-up dinners for some of the Fas top brass. Director General Rody Molloy quit and Health Minister Mary Harney faced a torrid time over a $410 bill for a nail and hair salon.

Aer Lingus thought it had made the PR boo-boo of the year when it made a right hash out of dealing with problems on its website after 300 passengers bought flights to the United States for just €5 each. The airline withdrew the flights, causing massive consumer backlash. But Dermot Mannion's blushes were rescued by Bank of Ireland losing the confidential details of 10,000 of its customers, when a pile of bank laptops were stolen.

The ludicrous oil price spike of the first half of the year put a pile of low-cost airlines out of business. Ryanair's Michael O'Leary pointedly refused to hedge future purchases of jet fuel and got slaughtered by soaring prices. Then he changed his mind and started hedging... just as prices began to plummet.

Former Aer Lingus chief Willie Walsh was making a decent stab at running British Airways until it moved its operations into the much vaunted T5 terminal at Heathrow. Everything that could go wrong did go wrong, and the move was a spectacular catastrophe. It cost Walsh his €800,000 bonus.

Bonus is a word that we won't be hearing too often in the coming years. A bit like "cash rich, time poor". The taxpayers have been hit with a brand new levy and the country is in recession. That light at the end of the tunnel is most probably a train.

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