Killian's €16m share sale hit more than his own pocket
There is nothing unusual about a chief executive of a large listed company pledging some of his shares in that business as security on a personal loan. It happens all the time.
But what happened with Owen Killian, chief executive of Aryzta, was very unusual - because it all came into the public domain.
The notoriously publicity-shy Killian will be highly embarrassed that any aspect of his personal financial dealings has become public knowledge. And this couldn't have come at a worse time for him.
Shares in Aryzta have halved in the last year. He has been under pressure from some institutional shareholders who have questioned his strategy and the performance of the group, particularly in the US.
Just when shares in the company are falling, the last thing you want is a chief executive offloading most of his stock. It makes investors want to run for the hills.
In Killian's case, it was not a reflection of his personal view on the future direction of the stock, but borne out of necessity because of a loan he had taken out on which the shares had been pledged as security.
He sold around €16m worth of shares last week in the wake of lacklustre half-year results. He is believed to have assured investors that the loan which triggered the sale has been fully discharged and he will not be selling any more shares in the company.
Stock market companies are not obliged to inform the stock market if the CEO pledges his shares as security on a loan, because it is essentially a private matter.
However, in Killian's case he must have borrowed heavily for some kind of investment decision which went south. As the shares fell in value, so too did the value of his security on that loan. Killian is only likely to have taken this very public course of action - namely selling into a falling market - if he absolutely had to, in order to resolve the issue.
It isn't clear what he borrowed to invest in, nor is it possible to speculate accurately on the size of the loan. If a chief executive had shares in a PLC valued at let's say €50m, no bank would allow him to pledge them as security on a €50m loan, because banks know only too well that shares can fall in value.
It is more likely that shares worth €50m could be pledged as security on a loan about one third that size - at most. Killian sold €16m worth of shares, which one year ago were worth around double that amount. This could point to a loan of about one third of their then value of €32m or just over €10m.
Killian's long career has been bound up with one company. His stewardship has been good for shareholders and for him. He has accumulated a sizeable multimillion stake in Aryzta. Inevitably that represented a huge percentage of his personal wealth.
Killian might have tried to spread that exposure from a single company by investing heavily outside Aryzta. If that is the case, then things have gone doubly wrong for him.
If he had left his wealth tied up in Aryzta it would have halved in value. But if he borrowed to invest elsewhere and it went wrong, then his personal wealth has been dented even more severely.
Killian and his management team will have donned the flak jackets in the last week as angry shareholders sought to heap further pressure on him.
Killian would have been bound by very strict rules about when he could sell these shares. This meant he had to offload them in one chunk just after a set of results that had driven the stock down anyway.
If he rides out this storm, he still has problems to fix. Aryzta continues to perform well in Europe - but questions remain about the business in the US, where it has lost some corporate customers.
He has still to convince the market about the longer term benefits of his recent €446m acquisition of a 49pc stake in French frozen food retailer Picard.
Killian will have his work cut out to ride this out and win back the confidence of the market.
Osborne takes a leaf out of McCreevy playbook
British Prime Minister David Cameron and Chancellor George Osborne have made two pledges they may end up regretting.
Cameron offered a referendum on a Brexit, which has ended up dominating his term in office. If he loses, he is gone.
Osborne promised to run a budget surplus by 2019/2020.
While curtailing growth forecasts and pledging very little by way of new expenditure cuts, Osborne had to try and help shore up his prime minister's position in the run-up to the referendum.
Osborne ended up delivering a budget during the week that was straight out of the Charlie McCreevy school of economics. McCreevy gave away free money through a special savings scheme. He slashed Capital Gains Tax. He cut taxes, widened tax bands and took people out of the tax net.
His philosophy was that when he has it, he spends it. Osborne should have been working towards that 2019 pledge, but instead went for a list of popular gimmicks - including a special savings scheme, lower CGT, looser tax bands and reducing the level at which people start paying the higher rate of tax.
McCreevy's SSIA scheme saw the taxpayer top up people's savings by 25pc. I remember people who already had the maximum amount of money saved simply set up a monthly standing order to a new savings account and collect free money from the state.
Osborne's scheme is very similar and will end up handing over thousands of pounds to people who don't need it. The big difference is the restriction on how punters can spend the money.
With McCreevy's scheme you could spend it on what you wanted, but with Osborne's scheme it can only go towards a pension or a deposit for a new house. Only those between 18 and 40 years of age can apply.
Despite the crisis in the housing market here, it would be daft for us to consider doing something similar again. Surely we wouldn't be that dumb? Would we?
SMEs feel chill as bankers love farmers and business
New figures from the Central Bank show Fine Gael's "recovery" is very much one for big business rather than small ones. Large companies are borrowing more than they are paying back in legacy debts and benefiting more and more from cheaper interest rates than SMEs.
Banks continue to screw small businesses with high interest rates. The figures show that while new lending to SMEs was up 10pc last year, the amount of debt they carry continues to shrink. SMEs are managing to borrow more money but still a lot less than the sector is paying back.
So where are these loans going? Well new lending to property-related SMEs is growing. Farmers and the agri-sector account for a sizeable portion of new lending. Strip out property lending and financial intermediary lending and you are left with core SME debt for businesses like shopkeepers, restaurants, small service companies totalling €18.3bn.
Credit to core SMEs contracted by 9.4pc in 2015 as €2bn more was repaid than drawn down.
The average interest rate on new lending to SMEs in the last three months of 2015 was a sizeable 4.52pc. This was 0.58pc lower than a year earlier - but still exorbitant in such a low interest rate era.
In fact, legacy debts to SMEs from the last boom had an average interest rate of 3.1pc - or 1.5pc lower than new lending today.
Things are going from "bad" to "marginally better" for SMEs - while for big business it is a case of going from "pretty nicely" to "bloody good".
Sunday Indo Business