Wednesday 24 January 2018

Business Confidential: SIPTU may spark revolt over its €267,000 Proclamation

The foundation document of the Irish Republic
The foundation document of the Irish Republic

The Insider

The market for 1916 memorabilia turned out to be more a damp squib than expected. The buyers simply didn't materialise and anyone who did buy, paid far less than forecast.

A medal awarded posthumously to Thomas Clarke - one of the signatories of the Proclamation - failed to shift at auction last week. It had been expected to go for up to €120,000. And a copy of the Proclamation sold for €185,000 - near the low end of estimates.

Copies of the Proclamation (of which about 50 still exist) sell for wildly volatile prices.

Back in the boom, another buyer paid close to €390,000 for a copy. In 2014, another copy sold for €90,000, having previously changed hands for €240,000 at the same auction house in 2007.

That represented some serious negative equity. A worse investment than a three-bed in Ongar during the property madness.

There was also another surprising buyer. In 2010, Siptu splurged €266,771 to buy its very own Proclamation.

While according to its most recent financial report, Siptu had over €19m in readies to potentially use as strike funds, the rapid escalation of industrial relations disputes at Transdev, Cadbury, Dart, St Patrick's Hospital and other workplaces - combined with falling union memberships - may see the beardies wish that they'd not bought near the top of the market.

Owen Killian, a spending spree and the margin call

What is it about super-rich company bosses and their personal finances?

Last week, Aryzta chief executive Owen Killian was forced to sell €16m worth of shares - nearly two thirds of his entire stake in Aryzta - following a margin call.

"I regret having to sell down shares at this time. This decision was triggered by the weakness in the share price impacting the collateral value of the share," he said.

Killian has dumped an awful lot of shares in the last 21 months. He sold €19.43m worth of shares in June 2014 at about CHF83 per share. Last week shares were closer to CHF37.

So what has he done with all the €35m proceeds? He bought a huge house on Shrewsbury Road for €6.5m and is spending a fortune rebuilding the mansion from top to bottom, to include an underground swimming pool and a car lift from the cavernous basement garage. But the margin call would tend to indicate that he's borrowed a heck of a lot of money to do it.

If he did, he wouldn't be alone. During the financial crisis, Carphonewarehouse co-founder David Ross faced a margin call when it emerged that he'd used around £162m worth of shares in the company as collateral for his loans.

But he hadn't disclosed the transactions and had to resign. (Directors of listed companies must inform their chairman of any share dealings and whether any shares have been used as security for loans.)

The David Ross case sparked a series of disclosures by Irish executives at the start of 2009, with the Murtagh family revealing that they had pledged 11 million shares as collateral. Gene Murtagh had pledged almost his entire 1.1 million shareholding at the time against loans. The Murtaghs announced that they were under "no pressure" to sell any of those shares.

Grafton group's Michael Chadwick, DCC's Tommy Breen, IL&P's Denis Casey and McInerney's Barry O'Connor were among those who disclosed that they had used shares as collateral for bank loans.

Aside from the issue of risk - shares go down as well as up - the whole question of transparency comes into play.

For example, Aryzta's group net debt, split between banks loans and corporate bonds, was about €1.7bn, according to the latest annual report. Back in 2008, Aryzta inked a €795m revolving credit facility with banks including BoA, Bank of Ireland, Ulster Bank, Danske, Barclays, BNP and Credit Suisse.

Heavey loses as Tullow's €16m bonus pot gets vaporised

Ouch. Aidan Heavey's troubles at Tullow Oil have been legion, and not all self-inflicted.

The falling oil price (which some analysts believe may be about to change very soon, based on a huge spike in long trades), coupled with a mountain of debt and a poor recent record of finding oil have shattered the share price.

Tullow shipped a $1bn loss last year as revenues tumbled 27pc. It has been ugly. Heavey and his team did manage to get a pay rise last year according to the last annual report. Quite an achievement, given that shareholders have been so badly scorched.

However, the former Lamborghini driving ex-Aer Lingus accountant and his management team did miss out on a truly stupendous bonus pay out.

In 2013, Heavey and the boys were conditionally awarded 1 million nil-cost shares subject to jumping a pile of growth hurdles. Tullow's share price was £12.41 at the time, effectively valuing that conditional award at up to €16.1m.

Heavey's own slice was potentially worth up to €4.73m at those prices.

However, the failure to hit the targets last year saw every single one of those nil-cost shares lapse.

The fall in Tullow's share price has also put an awful lot of once valuable options well under water. Given that bonuses have been traditionally such a huge part of Tullow's remuneration policy over the last decade, it'll be no surprise to see a new long-term incentive package presented to shareholders soon.

Sunday Indo Business

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