Dutch Courage

Apparently Zoe Group’s request for examinership is all about the public interest. The Irish Times reports:

The public interest is “at the forefront” of the bid for court protection by key companies in Liam Carroll’s troubled Zoe property group, the High Court was told today as it reserved to Thursday its ruling on their unprecedented second application for examinership.

Urging the court to appoint Ray Jackson examiner, Bill Shipsey SC said the interests of the wider community had never been “so much to the fore” in any application for court protection although there was no one arguing the public interest in this case except the companies themselves.

It was of “enormous signficance” the vast majority of the group’s banker creditors either supported or did not object to protection and Dutch-owned ACC Bank only got “Dutch courage” to oppose protection after the High Court rejected the first bid for examinership, he said.

Words temporarily fail me. But I’d be interested in your thoughts.

87 replies on “Dutch Courage”

Several points of interest. Note the reference to how the applicable law is the one brought in for Larry Goodman. If you needed a reminder of politics and business in the bed together, that’s it. Note also the notion that NAMA may end up as a lender of new money to Zoe, not just a purchaser of its loans. The fact that NAMA will be faced with a decision about whether to provide new funds to projects has not been discussed enough.

But it sounds like Zoe found a friendly judge.

From the newspaper article:

“Mr Shipsey said support could also be found in the detailed independent accountants’ report submitted as part of the application, and it was unlikely such a compendious report has ever been seen by a judge of the High Court before.”

Never before has a property empire which owes close to €3.0 billion to the banking system appeared before the courts either. (50% of those loans are NAMA bound it would appear, the other 50% will end up in the British toxic asset container) We are not talking about some ‘corner shop’ here, which cannot pay its bills. The Liam Carroll empire is likely to comprise of 5% of the total write down the NAMA plan needs property developers to take, in order for the NAMA plan to work. If you accept the fact that Pat McArdle suggested ‘borrowers’ will take a €30 billion hit.

More has been concealed from the court than has been revealed all through this case. The whole thrust of the Zoe developments defense is rather like one of those tribes in the African plains, who lined up one behind the other in other to conceal their numbers as they march from a great distance. The purpose of the Zoe defense, was to conceal the true size of one third of the entire Liam Carroll property empire. We are not even being allowed to contemplate the extent of a third of the entire empire. The purpose of this, is to make us believe that the problems, or potential liabilities and risk, are much smaller than they are.

Much in the same way as we have been told that Irish property developers only took out 75% mortgages during the Irish property bubble. The real figure, is probably somewhere between 100% and 200%, with some more added on. We are being fooled into believing that NAMA is a much smaller risk than it actually is. I would contend, the Irish people may feel a lot better, and the world markets too, if the full extent of things was revealed. Instead of all of this ‘optical’ BS.

@ Karl

It has took me three hours to find my voice again.

I am astounded at the sheer audacity of it all. This from the same report….

Addressing the effect of a possible rise in interest rates, counsel said rates could be fixed and AIB was offering a rate of 2.7 per cent up to 2014. A rate increase could add up to €14 million to ACC’s debt. Mr Shipsey said inbuilt flexibility in cash flow projections would go a long way towards addressing interest issues. The court also heard it was intended no interest would be paid on Zoe’s debt to Anglo-Irish Bank until 2014.

Almost, but not quite laid bare for all to see.

I, for one, would like to know when Anglo Irish made that agreement.
I am getting stupid now…commercialy sensitive.

I think I have made reference to this point in a couple of previous posts.

I cannot see anything in the proposed legislation that will allow NAMA to overule existing legally binding contracts between banks and developers, providing the developer does not default.

Other than Zoe, We have no idea of the timeframe granted by the banks.

Unlikely, but we do not even know if Capital repayments may have been suspended.

We will never know. Commercialy sensitive.

@Frank Galton

I would not go as far as to say that Zoe had found a friendly judge. I would predict with condfidence though, that if the application fails, then it is back to the supreme court. If that fails…then it is back to the high court again. The markers have already been laid down.

It seems a bit like a critically ill patient lobbying a hospital for a place in intensive care. With nurse NAMA in charge of the ward.

One of the pillars of a functioning economy which can attract foreign investment is a dispassionate and effective legal system. Irish Courts have always been quick to vindicate the legal rights of foreign companies. Mr. Shipsey may have over-egged the pudding to his own detriment.

One wonders did his Junior whisper “steady on old chap” at any stage of Mr. Shipsey’s call for favouritism for those who had to live in the country. Attacking Morgan Kelly as a Cassandra is actually making me laugh out loud. I can just picture M. Kelly looking at Mr. Shipsey like he has two heads and wondering what is the point in living in a country where such ill founded statements can be made in Court.

On the other hand, an examinership certainly seems to hold out the best hopes for employees, creditors, banks and others. ACC’s tactics seem a little heavy handed as there can be little doubt that the other banks would be willing to buy them out for the amount they can hope to recover on their loans. Do they really want to wind up the Zoe group or do they want to force the other banks to buy them out at over the odds?

The references to NAMA do not square with what the Minister has said. The Minister has said there will be no debt forgiveness and NAMA will pursue borrowers more strenuously than the banks. The banks owed money by Zoe can make no guess or promises as to how NAMA will treat Zoe. Indeed, their acquiescence may not be a vote of confidence in Zoe but rather a delaying tactic until they can wash their hands of the company.

More intriguing still is Shipsey’s statement that more than 50% of Zoe’s assets are exposed to NAMA. What about the other 40% plus??? How can NAMA take over all domestic banks’ loans to a corporate borrower and pay anything more than the current market value of the underlying security while that corporate borrower has debts to other banks? Is NAMA going to recover the properties by enforcing securities and then manage the properties for the benefit of the other non-NAMA banks? What a mess!

I think it was Minister Lenihan on Prime Time last week who was asked about the Anglo loan and although the answer was a little bumbling the message was that this loan had been offered some time previously to when the State had ownership.

If that is the case, does the Offer not contain a Material Adverse Change clause, Financial Covenant tests or Conditions Precedent (such as no restructuring, insolvency, examinership or receivership proceedings) one of which would almost certainly put a drawstop on further or any drawings? No? Then it’s a very, very strange Offer.

Or if the loan has been granted more recently, ie whilst under State ownership, then it looks like and smells like the State is assisting with the Examinership application for obvious reasons.

By the way, providing such funds may be commercially the best course of action for the bank so that it builds out a site etc. But in the circumstances with a Borrower on its knees a normal lender would take a very advantageous position with an equity stake, punitive interest etc. Did this happen? At least we know it would have with the previous Anglo management

I notice that the original article has been shortened.

“Mr Shipsey said the aims of Nama appeared to be “on all fours” with proposals in Zoe’s survival plan allowing time for the markets to stabilise so as to enhance property asset values for the benefit of the companies and banks.”

Well there you have it in a nutshell 🙄

“Addressing the effect of a possible rise in interest rates, counsel said rates could be fixed and AIB was offering a rate of 2.7 per cent up to 2014”

That is an extraordinary good deal. Not only will taxpayers being paying for Zoe’s excesses but the rest of AIB customers (the good businesses) will be paying for the preferential treatment in interest rates. AIB has to get the money back somewhere.

Forget Good bank, we need a New bank untainted by the practises of the past. Can’t see too many Foreign banks lending into Ireland in the foreseeable future when they see the shananigans going on to protect borrowers at their expense.

I am glad to see m’learned friend Chow and lie concerned about the NaMa mess.
If the banks are so accomodating, why should NaMa take over these obviously productive assets?


A revealing glimpse into the mindset of those running this little keptocracy. This knowledge economy and FDI is all very well, even welcome, as long as it doesn’t threaten the privileged position of the insiders.
The elites need people with money to extract rent from after all, and without a few googles, intels, elans, rabos etc, there wouldnt be much money. All very well for these companies to rent, they may even be allowed to buy; just don’t take on the protected ‘professions’ or interests.

It is in the interest of the current elites that their failures are hushed up and the public are press ganged into paying for them. It is in the public’s interest that the failures are exposed, the current elites humbled and new entrants have a go, with everyone playing to the same rules.

L’etat c’est moi. indeed.

Shipsey clearly knows nothing of Greek mythology.

The whole point about Cassandra was that she was always right but nobody would listen and/or do anything about her warnings…hardly an insult to M. Kelly

@ Stuart

the 2.7% reference is just the current 5yr interest rate swap. It would assume AIB charges them market cost rate and makes no margin. So there’s no direct ‘cost’ to the bank from offering this rate, though there would be indirectly from capital costs etc.

Mr Shipsey’s reference to the NAMA draft legislation is interesting to say the least. Is he arguing that the Judge should be guided by draft legislation? I thought that we were governed by laws duly enacted rather than by consultative drafts of laws.

@ Eoin, KW, BL
Your comments on the appropriateness of theis please.
“The court also heard it was intended no interest would be paid on Zoe’s debt to Anglo-Irish Bank until 2014. ”

When you look at the terms of the AIB and Anglo lending, is it no clear that both banks are engaged in low/no margin low/no return lending to an insolvent developer. I would venture to say risk is not being appropriately priced. One of these banks is de jure nationalised, the other is “de facto” nationalised. Should we not be really scared at the behaviour of “nationalised” entities.

@Eoin Thats not the point! If an insolvent company running from its creditors can get this deal, why can’t any other business? I know I cant get that rate, and I have a profitable business. This is a cost on all AIB customers, subsidizing these failures.

Clearly the risk of loaning to Zoe is higher than loaning to a profitable company. So were back again to the Irish banks comfort zone; cronyism, corruption and incompetence; with the taxpayer on the hook….

Thats why I keep harping about NAMA paying taxes, publishing accounts etc. Can you imagine what these shower of gobshites and fraudsters will get up to if they don’t even have to report it?

Frank Galton Says:
September 7th, 2009 at 11:16 pm

“Note also the notion that NAMA may end up as a lender of new money to Zoe, not just a purchaser of its loans.”

Isn’t that the purpose of borrowing up to €10bn under Section 44 Sub Sections 3 & 4?

(3) NAMA or a NAMA group entity may, from time to time, with the approval of the Minister, borrow, with or without the guarantee of the Minister, such sums of money (including money in a currency other than the currency of the State) as it determines is required for the performance of its functions under this Act.

(4) The aggregate of the principal of all sums borrowed with the guarantee of the Minister (exclusive of debt securities borrowed from the Minister or NTMA, debt securities issued by NAMA or a NAMA group entity to provide consideration for the acquisition of bank assets or other borrowing from the NTMA or Minister) shall not exceed €10,000,000,000 or a lesser amount that the Minister prescribes.

I could be wrong here, but I interpret this as

1.NAMA can borrow up to €10,000,000,000 and have this guaranteed by he Minister
2.NAMA can borrow further, but without a guarantee
3.NAMA can borrow in foreign currency
4.NAMA can lend €10+ to developers to complete projects

If I’m wrong please let me know.


@ Jl

well the Anglo roll up for such a long period is obviously seriously worrying. Roll ups are only supposed to be stop gap measures while you restructure or something like that, or as part of a very well though out and structured development plan where revenues won’t be coming in for a while. This is a medium-to-long term measure and is highly questionable. @ 3-4% per year rolling up, this starts to become serious money over a 5 year stretch.

The AIB one i have less issues with, its just the reality of the situation AIB is in, ie return on capital vs return OF capital. If they were to charge them a full and proper rate, i imagine Zoe would be in major difficulty straight away, but maybe they can just about get by on the no-margin rate. At least there’d be some element of servicing of the debt going on. Its possible that they also don’t have to classify this as non-performing as a result, but im not 100% on that?

@ Garry

i wasn’t saying whether it was right or wrong, i was just explaining where the rate was coming from, and i wanted to make sure that some people didn’t assume that AIB was making an outright direct loss from lending at that rate. Is it a crazy low rate (in relative terms)? Yes. Does it make sense (for AIB)? Yes. These are the times we live in…

Garry Says:
September 8th, 2009 at 8:31 am

“Thats why I keep harping about NAMA paying taxes, publishing accounts etc.”

Agree entirely. At a minimum FG, Lab, SF should insist that NAMA produce audited accounts as if it were a quoted company.

Anything less is an invitation to fraud and corruption.

If my local watering hole is anything to go by, then there seems to be a new reasoning developing for the support of Nama. A quick summary of the conversation as led by a local FF activist

FFA – Look, we are all agreed that Nama is to bail out the banks, developers and put a floor under property prices, right?

Local – What do you mean put a floor under property prices?

FFA – To stop the values falling any more

Me – surely it is in the countrys interest to have lower costs on everything if we intend to regain a competitive postion?

FFA – There are other ways to achieve that

FFA – What I am trying to tell you is this. Is there anyone here who wants to see the value of their house falling even more than it already has?

Just about all – NO

FFA – Then we should be supporting Nama

Me – But doing so stops the property bubble from fully bursting.

FFA – Exactly! That is my point.

Me – I then ventured my opinion again that it was not in the long term interest of either the taxpayer, society or Ireland Inc.

FFA – Margaret Thatcher said there’s no such thing as society.

By the end of the night, I felt as though I was someone from the Obama administration trying to explain the benefits of the healthcare reforms in a Texan town Hall.

Maybe the FFA is right, have we ever had a sense of society since independance?

@John Sheehan

Indeed, as far as I know, even where the legislation itself has been enacted the judiciary must rely on the legislation itself and not consult/reference/interpret the relevant Oireachtas debates when it comes to this sort of thing.

@ All

Preserving the capacity of Anglo Irish Bank to continue its operations as a going concern is THE PUBLIC INTEREST.

Does anybody disagree?

@ Michael

we all know, intrinsicly, yor’re 100% right. But the problem is that i don’t think either our economy or society could handle a full bursting of our property bubble right now. Would it not be better to stabilise the market now, and create tools to foster long term sustainability in the market via both property taxes and the eradication of many of the tax reliefs that fueled the bubble (both on developers/investors as well as rentors/homeowners), as well as comprehensive reform of the planning system, compulsory purchase orders etc?

“While ACC was entitled to try and cut its losses, the Zoe companies and most of their banks were “not so fortunate as they have to live here and make the best of the situation”.”

If this argument holds it is the best reason for foreign capital to flee the country.

It basically says that a foreign company having invested in Ireland can sling it’s hook if Liam Carroll or any of his pals get in trouble.

Those of us interested are still debating the relative merits of Nama, FGs good bad bank or nationalisation.

I cannot help being cynical though in thinking that with the Tax commission report yesterday and reporting and possible publishing of the clerical abuse report due today, that a lot of choreographing has gone into deflecting attention away from Nama.

What with Lisbon2 as well. What is the average citizen likeley to consider first?



But is there any political party in the country capable of delivering the tools and fostering the long term development of economic well being in Ireland.

At the moment, I would doubt it.

Even amongst opposition TDs, how many can you think of that you genuinely believe have the interest of Ireland as their core principal?

Michael Harvey Says:
September 8th, 2009 at 9:08 am

“I cannot help being cynical ….”

It could backfire though. Lisbon II could fail.

@ Michael

as i’ve suggested before, a government of national unity at the start of this year would have been the way to go. At least then we could have gotten rid of the name calling, blame pointing and vested interest taking. I think between the 3 major parties (FF, FG, Lab) we could have cobbled together a decent and capable cabinet. At this stage its probably too late for that.

As some else on this site has mentioned on more than one occasion, one of the problems with the anti-NAMA side of the debate is that there’s been no policitically and economically viable (ie from FG AND Lab together) alternative put before the public by any of the leading Opposition members. Indeed, when was the last time you saw a major push for FG’s Good Bank idea in the last 4 or 5 months? Until this happens, and despite any smart and sensible ideas put forth on this site, NAMA is indeed the only game in town.

@ All

Preserving the capacity of Anglo Irish Bank to continue its operations as a going concern is THE PUBLIC INTEREST.

Does anybody disagree? 🙂

Again, agreed.

FG have been weak and/or pathetic in attempting to convince the public on their proposal. The leadership might like to think otherwise, but I think the very public intervention of Fitzgerald and now Dukes has scuppered the idea even amongst many of their own supporters.

Nationalisation? I see merits and disadvantages.

The arguement put forward by the proponents that it worked succesfully in Sweden, Denmark, Norway and Finland is compelling to a certain degree.

However, with the exception of Finland, the banks in the other three countries have had to be bailed out again in the current crisis.

@ Greg

without going off topic, do you really think Lisbon 2 could fail? It’d be a disaster for the country, and i think people ‘get’ that this time. I think we were still caught up with how great we and the Celtic Tiger were last time. I can’t see us being so naieve again this time.

@Michael Harvey “that a lot of choreographing has gone into deflecting attention away from Nama”

I think I warned in the latter part of August that now the PR boys were back from Tuscany/France we could expect the choreography. No, you are not being cynical.

Eoin Says:
September 8th, 2009 at 9:44 am

I think it could fail. It is, still, being presented to the public as

1 The EU has been good to us ~ Don’t be an ingrate.
2 All of your concerns have been addressed ~ Don’t be stupid
3 If it fails the sky will fall in ~ Be afraid
4 Trust us we are your leaders ~ We know what’s best for you.

Agreed, don’t want to go OT but I have yet to hear the positive arguments.

If it doesn’t fail I think it will be a lot closer than its proponents would feel comfortable with.

It has been touched on before over the last couple of days in a few of the other posts re how economists got it so wrong, but the last few weeks shows how deeply behavioural economics can influence the direction an economy is taking.

On the one hand, we have taxpayers baulking at the idea of having to bail out bankers and developers. Yet those same taxpayers do not want to see the price of their property fall any further.

That can only leave us with the impression that the average Irish citizen actually believes that the value of their house is worth more than double what it was a few years back.

Self delusion on a national scale. Backed up with ever increasing wage demands to pay for same property.

To steal from a branded cosmetic slogan

Because we are worth it

Are we?

@ Michael

interestingly, Finland, post its 1990’s credit crisis which was actually incredibly similar to ours, has sold off most of its banking sector to foreign owned lenders (Nordea earns less than 25% of its money from Finland these days), and most of the players there could now better be described as pan-Nordic banking groups. This has meant that in the current credit crisis, it has obviously felt less of a need to prop up any of the banks operating there. It has also most likely led to a far more efficient allotment of capital to the productive parts of the economy, rather than those favoured by political and populist trends.

Should this not be the way we go about reforming and repairing the banking sector, rather than scaring off foreign capital or shunning the idea of foreign ownership as per Alan Ahearnes article the other day? Maybe just keep one or two Irish-owned banks with c.25% market share which the government could co-operate with in the future in the event of another global credit crisis?

@ Greg

Anglo should have been taken out of the guarantee due to its behaviour.
Anglo should have been wound up, tidied up, and its corpse presented internationally as an example of vigilance.

Imagine Govt coming accross a junkie about to shoot up and saying that could kill you, I am here to help!! Give me half of it!!

There was a story in the media a few months ago that immediately after independence, an Irish bank wouldnt honour the commitments of the new state. Micheal Collins, upon hearing this, went straight to the bank manager showed him the wrong end of his revolver as proof of the bona fides of the new state. Cheques were honoured.

That gun must be lying in a museum somewhere……



Agree totally.

A lot of comment here has cited Bo Lungdren in support of the arguements against Nama. Equally, the pro Nama brigade have used his quotes.

All I am trying to show is that even with Nationalisation and cleaning up banks, without stringent Capitalisation regulations and an observant watchdog, banks can still get into serious trouble or fail.

Swedish banks are massively overexposed in the Baltic states.

The announcement of an agreement in principle at the Bank of International settlements meeting last Sunday suggests there might be some hope hope of an increase in Capitalisation requirements. It remains to be seen.

Al Says:

September 8th, 2009 at 10:52 am
@ Greg

I agree your sentiment. I personally think Anglo should have been thrown under the nearest bus.

You are however wrong.

Anybody else disagree?

Preserving the capacity of Anglo Irish Bank to continue its operations as a going concern is THE PUBLIC INTEREST. 🙂

@ Greg
Preserving the capacity as an ideal and preserving the capacity in practise requires distinctions to be made.
Solving the current banking situation is a good idea but to put nama into practise based on that imperative?
I understand (I Think) what you are saying, I disagree.
But feel free to elaborate

Al Says:
September 8th, 2009 at 11:12 am

Just on a fishing expedition Al. Hope you’re not offended.

The words “Public Interest” probably mean something to you in a common or even philosophical sense.

And it is that sense that is letting you down.

We no longer live in a world were words mean what we think they mean.

Debt Is Wealth
Lies Are Truth
Evil Is Good.

You are wrong Al. Your Dear Leaders have changed language so that you can understand why they act as they do. Of course by the time the Public understand what the Brave New Public Interest is it will be too late.

Look at b) iii. (This is in the PUBLIC INTEREST)

Section 2.1 (b) of the ANGLO IRISH BANK CORPORATION ACT 2009 states,
(b) the performance of those functions is necessary, in the public interest—

(i) to remedy a serious disturbance in the economy of the State,

(ii) to prevent potential serious damage to the financial system in the State and ensure the continued stability of that system, and

(iii) to preserve the capacity of Anglo Irish Bank to continue its operations as a going concern.

@ Greg

I presume you presume that you are older and more educated than me???
Thanks for the pat on the head!

You refer to the act that was brought through the Oireachtas, voted through by cuckolds and catamites.
Laws can be repealed.
How about a F.A.U.T.A. act for September 2009?
Easily done.

The waters of the Rubicon have never been so low!


@ Al & Greg

the one thing to remember is that we’ve pumped in 4bn in capital into Anglo now. As such, if its at all possible to protect and maintain this, then thats what we have to do (assuming that protecting this doesn’t cause an even greater loss elsewhere in the economy).

Personally i don’t think Anglo will be maintained as a ‘going concern’ in the true sense of the word. After its NAMA-ised, i imagine it’ll be wound down over the next few years, with the potential to retain certain parts in the form of a new niche SME lender at a later date. In this way some good could possibly come out of its ugly and disastrous demise.

Al Says:
September 8th, 2009 at 11:32 am

“@ Greg

I’m not the one patronising you. Your leaders are.

The Public Interest now has a statutory definition.

What do you think the chances are of the ANGLO IRISH BANK CORPORATION ACT 2009 being repealed?

Or for that matter CREDIT INSTITUTIONS (FINANCIAL SUPPORT) ACT 2008 or the NAMA Bill once it has been enacted.

I say almost zero.

Meanwhile back on the farm everybody thinks the Public Interest is being served.

“Ah, that is different!” said Boxer. “If Comrade Napoleon says it, it must be right.”

Bailout for developers and banks./ |Restoration of property bubble.

“The aim of Nama appeared “on all fours” with proposals in the companies’ survival plan to allow time for the markets to stabilise and help ensure property asset values are enhanced to the benefit of the companies and the banks. Nama might also be able to lend monies if it considered that was to its advantage.”

Learned Counsel has, in his submission to the High Court, managed to demolish everything we have been told by BL and DoF in one short passage.

“on all fours”

This may mean that the issues are identical in the hallowed environment of the four goldmines.

But in these circumstances it could also mean that NAMA & Zoe Developments are on all fours because both are pigs.

Got any lipstick?

@ Greg

“It is not these well-fed long-haired men that I fear, but the pale and the hungry-looking.” – Julius Caesar


The ACC Bank has done the citizens of Ireland a tremendous service by their dogged pursuit of the case against Zoe Developments in the courts.

Does anyone think that a state-run bureaucracy like NAMA, open to political influence, will take loan defaulting companies like Zoe Developments through the High Court, then to the Supreme Court, then back to the High Court and very likely back to the Supreme Court again? No way José.

Let the law deal with all these cases in open court. Let the law deal with the fraud committed by bankers and developers during the recent boom. Do justice and let the sky fall.

Build a new banking system on clean foundations. Before it is too late.

One aspect that doesn’t seem to have been picked up on is the extent to which Bank’s might alter loan contracts to get them over the NAMA finishing line. Hopefully the powers-that-be are on top of this, as failing to do so will result in higher losses to NAMA.

If I were a bank with a developer that had 80% of his loans NAMAble and 20% I’d be left with, what would I do? Well if I could get away with it, I’d ensure the NAMAble loans looked as if they were performing (extend roll-up etc). Then I’d take steps to ensure that any additional protection moved to the 20% (transfer/waive guarantees on the 80% in the hope that it improves recovery prospects on the 20% etc). It’s quite possible to create a win-win scenario for banks and developers.

In relation to the actual Zoe court case, Monty Python’s Dead Parrot sketch springs to mind. It would be funny if it wasn’t so serious.

Re “counsel said rates could be fixed and AIB was offering a rate of 2.7 per cent up to 2014” – I don’t get this. If the loans are going to NAMA, why should AIB be babbling about rates they will have nothing to do with (and are mispriced)? It’s not in the public’s interest to inherit rates that only price in a subset of the costs.

In fairness you do point out that 2.7% is just the 5yr interest swap rate. Using this swap rate, what rate would you suggest the bank could lend to developers at? 🙂

what can one say….
As a shareholder in AIB im really thinking of a phone call …..as a taxpayer and citzen, wheres me pitchfork and flaming torch

@ Ahura

well the ‘value’ of the loan would be further impaired if the margin on it was also below ‘real’ cost, ie a loan at euribor +200bps is worth more than a loan at euribor flat. This isn’t even a subjective question, its a categoric NPV fact, which would be impossible to argue otherwise.

As such if AIB switched it from floating+margin to the 2.7% rate, then i’d expect a fairly decent increase in the discount appliable to it. Given that margins on these loans should be 3% (ie real rate of 5.7%) or so, roll that up for 5 years x 3% = 15%, NPV it back to 13%. That’d be the sort of additional discount you’d need to make it ‘fair’.

Btw, its exactly for situations like this that we had the previous discussion about NAMA being allowed to buy derivatives. The hedging of their interest rate exposure, forgetting about the margin issue, is actually very prudent given that many commentators have expressed worries about NAMA “being able to wash its face” in the event of interest rate rises.

Eoin Says:
September 8th, 2009 at 11:37 am

“Personally i don’t think Anglo will be maintained as a ‘going concern’ in the true sense of the word.”

I bet you 90,000,000,000 Mongolian tögrögs it will.

How much no margin business will they end up doing? Assuming they’re still a plc they have to make a return for the shareholders and that means the good performing businesses pay more to compensate for the zero margin business. Which will make them expensive to bank with.

Anglo should be wound down and the good assets if there are any sold off. Can’t see any reason why keeping it going is in the Public Interest.


Would you care to revise your assessment of Finland?

Bad timing to hold up Finland as an example, today of all days.

They published their GDP figures for 2009 Q2 in the past hour.

Their GDP is down y-o-y by 9.4% compared with 2008 Q2. The second time in a decade they’ve had a recession of this magnitude. Ireland’s GDP figures for 2009 Q2 aren’t out yet, but I’ll bet they are a lot better than that.

Last week, both Ireland and Finland published their manufacturing output figures for 2009 Q2. In Ireland, it was up 1% on 2008 Q2, in Finland it was down 25% on 2008 Q2.

I’m always amazed by the constant adulation of the Nordic countries’ economic performance that takes places in Ireland. I think it owes more to male fantasies of long-legged blond Nordic girls, than to detailed analysis of their economic statistics.

The few revelations as a result of the application have been quite enlightening and indeed astonishing.

It would seem that the Banks know exactly which side their bread is buttered on.

That, I think, should have us all concerned.

Yet again though, the nasty little comments about a foreign bank.

It is becoming a recurring theme. I must admit I had my doubts on safety issues re the shell pipeline fiasco. I now find myself wondering if it would have been plain sailing if it was an Irish company involved instead.

@ all

I just got this in an email from a disenchanted FF supporter. I had not been aware of it till now. My FF friend thinks it is time the party got back to basics….God help us all

De Valera
St Patricks Day 1943

“… The Ireland that we dreamed of would be the home of a people who valued material wealth only as a basis for right living, of a people who, satisfied with frugal comfort, devoted their leisure to the things of the spirit – a land whose countryside would be bright with cosy homesteads, whose fields and villages would be joyous with the sounds of industry, with the romping of sturdy children, the contest of athletic youths and the laughter of happy maidens, whose firesides would be forums for the wisdom of serene old age. The home, in short, of a people living the life that God desires that men should live. . . .”

Stuart Blythman Says:
September 8th, 2009 at 2:14 pm

Anglo should be wound down and the good assets if there are any sold off. Can’t see any reason why keeping it going is in the Public Interest.”

I agree. I think the Public Interest would have been best served by letting Anglo Irish go bankrupt (along with Irish Nationwide), and the wagons should have been circled around the rest.

I don’t think it is in the Public Interest to preserve Anglo Irish as a going concern.

Fianna Fail, The Green Party and Alan Dukes think it is in the Public Interest. Nay, they know it is in the Public Interest.

They collectively intend giving this sick pig the kiss of life. I hope for Dukes’s sake that pig is wearing strawberry lipstick. Still, with all the money he’s getting paid he’ll be able to buy a gold plated bath having squandered (what?) €10Bn of our money.

Slow deep breaths… for a few posts there I thought I was in Politics.ie.

Rubicon ; problem is that nobody now knows the course of same river.


Sorry about that. It just seems now that it is impossible to seperate the Nama debate from politics.

@ John

sorry John, do you have any information about a mammoth Finnish banking bail-out in the works to the tune of 60bn or so? And if you’re a follower of the CDS and sovereign debt markets, well i’m sure you know that Finland is currently borrowing cash at around the same rate as the Germans, so it seems everyone else reckons they’re doing ok. But hey, if the long-legged-blondes storyline fits better with you then thats great…

Sorry to be flippant, but i’d take a run-of-the-mill recession in Finland over our banking crisis any day of the week.

A little off topic:

I think that it is a pity that the public cannot access transcripts of these important cases. In fairness to Mr. Shipsey SC and his emerald green jersey/wig, we are only hearing his words second hand. If we really want justice to be done in public then let the public see, hear and read what is going on.

Transcription is expensive but the Courts microphone system has been hugely improved. Surely they could pick a case each week that is of particular public interest and email the sound file to the stenographers?

Even better, if the protagonists engage a stenographer then it should be a condition that a copy goes to the Judge with permission to publish. As things stand, both sides usually split the cost in big cases and the Judge gets a copy of the transcripts too.


Good idea.

I think at the moment it is only the judgement that is made available.


I’d hardly call a fall in GDP of 9.4% a run-of-the-mill recession.

At least, it wouldn’t be run-of-the-mill in Ireland.

Maybe, its becoming run-of-the-mill in Finland, as its their second recession of this magnitude in little more than a decade.

At any rate, it means that all of this talk about Ireland having the biggest recession of any developed country since the Great Depression is a lot of hooey. We aren’t even having the biggest one this time round.

Re Finland’s banks, I know nothing about them, other than what you wrote above – namely that, having gone bust in their last mega-recession, they don’t own much by way of banks any more. And the way they’re going, they won’t own much by way of manufacturing soon (25% of it gone in a year). But, of countries that still own banks, I think you’ll find that most of them are organising bail-outs.

@ John

thats basically like saying, “i own a car, so when i crash it i know how to fix it. You don’t own a car, so you don’t know how to fix one”. That’s all grand, except if you’re a really bad driver and the cost of fixing the car is so expensive that maybe it makes more sense to get the bus or a taxi instead.

You seem to have taken me up wrong John. Im not against NAMA, and im not against bailouts. You get the banking system you ask and vote for, but you’re responsible for it when it all goes t1ts up as well. What i am against is repeating our mistakes and not trying to create long term fixes for the most obvious ones. I believe that a small open economy like Ireland would be better served by not being ‘responsible’ for 70% or so of our banking system, a fairly innefficient and uncompetitive one at that.

@ Brian

Everyone I have meet today on the street is mad angry about Ireland Inc
It is rubbing off on me.
Irrational demands!!


@ Greg

that 90,000,000,000 Mongolian tögrögs still wouldn’t buy me a half decent semi-d in Sandymount….

@ Michael Harvey

I would say there is a good chance that we are going back to basics under FF. Standing around at the cross roads looking at athletic pursuits maybe the only thing that most of us end up doing. Going back to 1943 living standards is also a possibility.

Still look on the brightside, we still have the GAA and we would be healthier if we were cycling to matches. Moreover, the last time a team did a 4 in a row was in the 1940s. Cmon de Cats

How Zoe was allowed to reapply for examinership amazes me.

A failure to present necessary evidence by an applicant should not be an acceptable excuse for another bite at the cherry. This is doubly the case when the party oopsing the application suffers prejudice as a result

Every day that has passed since the SC rejected their application is a day wasted.

What is happening is an abuse of process

Eoin Says:
September 8th, 2009 at 2:04 pm

5.7% is a pretty reasonable answer (using 2000-2007 margins). I think “normal” in the future will be higher 400-500bps over base*, mortgages will probably settle around 200bps over base. If you’re to use secondary market rmbs spreads, there’s a huge distance to go to get to this level.

(*I think this spread would be higher if lenders offered the same terms as the NAMAble loans. In the future, these borrowers will need to offer greater equity/additional collateral/guarantees and valuations will be tighter).

The core point I’m making is 2.7% claimed by Mr Shipsey is not realistic and AIB would be offering Carroll an extra special rate not available to other customers. If AIB were to keep this debt on their own books, it would not be optimal to apply this rate. They’d be better off with a higher rate and forgive some interest owed or accrue it as (theoretically) they can seek to recover interest owed.

Eoin Says:
September 8th, 2009 at 4:26 pm

“@ Greg
that 90,000,000,000 Mongolian tögrögs still wouldn’t buy me a half decent semi-d in Sandymount….”

No. But it’d get you a nice yurt and a couple of yaks, and if Michael O’Leary starts offering flights for €9.99 to Ulaanbaatar, and if Liam Carroll can scrape together the price of a one way ticket, sure in the time it takes you to say NAMA one yurt and a couples of yaks in Mongolia will buy you a house on Shrewsbury Road, and if you put that house into a trust in Jersey with your wife as beneficiary even if the bet goes sour you still have a house on Shrewsbury Road.

At lot of ifs I’ll grant you. But not have as many as Brian the Builder is using.

Trying to keep on the track of this post, I think we’ll have to wait until Thursday for the judgement of the good Justice. However, it’s ominous that Zoe were allowed to apply to the High Court again having been previously rejected by the High Court and the Supreme Court. It’s look like a bit of inverse “double jeopardy”: go in initially with a poor case to test the standard of proof required, be rejected with reasons given, and then rustle up some “evidence” in response to these reasons.

The public interest line advanced by Zoe’s Counsel puts the Justice in a very difficult position. Hee will have to address it in his judgement, becasue, on the basis of the IT’s report, it seems to be a key plank in Zoe’s case. He has four options:
1. Dismiss this public interest argument, but rule for Zoe;
2. Dismiss the argument and rule against Zoe;
3. Accept the argument and rule for Zoe; and
4. Accept the argument but rule against Zoe.

1. or 2. will leave him exposed to being accused of making a political statement. 1. or 3. will leave him open to the accusation that he was got at. And he might find it difficult to square 4.

It is unfortunate that it is only in the Courts that any bit of transparency has emerged about the machinations behid NAMA. It just shows how bad things have got in democratic governance terms when the Courts are being pulled in to make implicit judgements about policy (and when they are the only location where solid information emerges that is needed to inform the policy debate) when the resulting legislation has not yet been enacted.

VOTE NAMA & “help ensure property asset values are enhanced to the benefit of the companies and the banks.”

Paul Hunt Says:
September 8th, 2009 at 5:12 pm

I think he can go for

“2. Dismiss the argument and rule against Zoe;”

The Public Interest case is an assertion, not proven fact before the Court.

And even if he accepts Shipsey’s assertion it is then open to ACC to appeal on the basis that the judge has overestimated the importance on Zoe to the public interest regardless of arguments for or against NAMA on that basis.

In any event the Judge can rely on Brian Lenihan for guidance.

“However, a spokesman for Finance Minister Brian Lenihan last night insisted the decision would have no impact on NAMA, which will proceed as planned.”

If NAMA is in the Public Interest and if Brian Lenihan’s opinion is that the decision on Zoe would have no impact on NAMA then the decision on Zoe will have no impact on the (Lenihan) view of Public Interest.


@ Ahura

i think 300bps wont be that odd in the future, but as you said, it’ll involve much more stringent covenants, higher equity input, tighter collateral etc etc. But yeah, its probably the starting point rather than the average or normal rate.

Mortgage lending at 200bps+ is already here ex AIB. Some of the UK lenders are offering fixed rates at 300bps at the moment, though this could be as much to discourage new business as anything else.

“it’s ominous that Zoe were allowed to apply to the High Court again having been previously rejected by the High Court and the Supreme Court.”
“ominous” is not the first word I would have selected – although I don’t dispute that. How about grotesque, unbelievable, bizarre, unprecedented and ludicrous (GUBUL maybe). Surely the fact that it got this far having been thrown out of the Supreme Court makes a circus of our legal system. There are certainly no shortage of willing clowns.

I’ve no idea how the case will go….

The last time, there was plenty of hints that it was not going well for Zoe, the judge’s remarks were more biting, this time it is a lot quieter, whether Zoes plan is credible or whether its the judges style…

I dont see the public interest argument… I dont see the argument for Zoe survival if ACC are demanding payment.

Its clear from the article that Zoe is insolvent and can only survive if it does not pay even interest on its debts…

Behind all the bluster, the numbers speak for themselves. The questing facing the judge is does the company have a reasonable prospect of survival.
If we are to take this as can Zoe recover to trade profitably and start to pay back its creditors; the answer has to be no….. Even if we are to take this as can Zoe pay back ACC the answer has to be no…..

All they have shown is that at the very best Zoe in 2 years can pay back some interest on some loans… And thats with extraordinary forbearance from all the banks, except ACC.

ACC are within their rights to demand their original T&C’s are enforced… And I think any objective looking at the numbers would conclude they are right to be worried about their loan. Its up to Zoe to prove they can pay it back and intend to pay it back and they have failed to do so….

If a judge turns down ACC, I would be shocked….

From the article…..
Addressing the effect of a possible rise in interest rates, counsel said rates could be fixed and AIB was offering a rate of 2.7 per cent up to 2014. A rate increase could add up to €14 million to ACC’s debt……

The court heard it was intended that no interest would be paid on Zoe’s debt to Anglo Irish Bank until 2014…..

It is claimed the group will be “balance-sheet” solvent by 2011 with sufficient income of some €40 million from property rents, sales and share dividends to meet interest repayments and provide a surplus of some €20 million in assets over liabilities.

A previous petition was rejected by the High and Supreme Courts on grounds of no evidence to support the group’s claim of a reasonable prospect of survival. If liquidated, the seven companies would have some €1.1 billion in liabilities, the court has heard.

If examinership is refused, we will know that we still have some kind of system of justice in the country. if the argument, “this is in the national interest” succeeds then we are definitely living in a banana republic and Paul Krugman needs to update his article on crony capitalism and I might suggest a heading of “Legal State Sponsored Crony Capitalism.”

They should never have been allowed back into court, and by so doing, the whole court system is on trial not just Zoe.

“If a judge turns down ACC, I would be shocked….”
If ACC succeed in this I will be shocked. I’m afraid I don’t share your faith in our judicial system.

“What is happening is an abuse of process.”
Spot on

@ Robert
Exactl that.

Alternative 2 NAMA? Use NAMA wonga to reduce principal on private homes bought between 2004-2007. If that doesn’t win over the locals in MIchael Harve’s Local Watering hole I don’t know what would. And let the banks sort out their own developer related debt prblems and go to the wall if necess. If we are to be paing that 1.5% interest plus/ear on sixti b nama bonds anwa not use it to benefit the man over the few.

That said I think it’s a bogus argument in favour of nama to ask the doubter: ‘what would u do instead?’ Show us the whole of nama on the table and i’ll show mi cards.

I don’t know if the court can find in favour of Zoe….

The fact is a creditor is not being paid according to an agreed schedule and Zoe are showing no signs of paying up or even that they intend to pay up. In all these reports we haven’t seen any commitment from Zoe that they ever intend to pay ACC.

Either Ireland is a safe place for companies to invest in where rights are respected or its not…. For the court to go against ACC when Zoe are openly giving them the finger would send out a very clear signal that commercial law in Ireland is a shambles. That creditors have no rights.

Read the reports… This isn’t a plan to turn a company around, It is just not paying people for a few years. When Zoe are using projected dividends from share purchases to cobble together the 40M income from 1.1B liabilities; its funny….. Divide up the shares between the creditors, Zoe is adding zero value to that process.

I know we can have theories on delaying tactics etc but I really struggle to see how a court can conjure up a judgment in favour of Zoe. They have already lost credibility in accepting the appeal. Even if they reject it and allow Zoe to appeal again to the Supreme Court would in my view cast real doubts on the integrity of the Irish justice system.

@Eoin & John
On Finland – at one stage Nokia accounted for 25% of Finnish exports and made up about a third of the Finland’s stock market capitalisation, 5% of total manufacturing employment and 4% of GDP – a lot of eggs in one basket. How their manufacturing performs in the future will depend a lot on Nokia. Although at least the company is Finnish.

Our manufacturing employment prospects seems to depend on foreign companies.

The “public interest” claims by the Zoe Group are breathtaking but necessary from a legal perspective. If the Zoe Group establish that they have “a reasonable prospect of survival” – and they failed to do so on the basis of their original application – this will leave the court with wide discretion as to whether an examiner should be appointed. The Supreme Court emphasised that the court can refuse such a petition after taking into account “all relevant interests”. The legal tactic seems to be to invoke the widest possible “public interest” so as to trump the rights of ACC as creditors.



Are you certain that Nokia is Finnish? I thought I read here a few weeks ago that most of the shareholders of Nokia were not Finnish? Just as most of the shareholders of CRH are not Irish. Maybe, I read it wrong.

Anyway, I fail to see the relevance of the ethnic composition of the owners or shareholders of a company. I myself work for an American-owned company. This is 2009, not 1939. Nearly all large companies are now multi-national, both in their ownership and their shareholdings. What is much more important is how manufacturing output is performing, not who owns it. As I said earlier, manufacturing is down 25% so far in 2009 in Finland, down 1% in Ireland. That’s really all that matters.

Re the main subject of this thread, the Zoe court case. The torrent of anti-Zoe posts are beginning to ressemble a lynch mob. I have no connection with Zoe, in fact I never heard of them until I read this thread. But, it looks as if all they are doing is trying to buy more time in the hope that the economy in general and their sector in particular will upturn in the next few years. I don’t think that is uncommon. I don’t think that is unrealistic.

However, its for the judge to decide in accordance with the law. I have every confidence that he will do that. A lot of the posters clearly will not accept the judge’s decision if it doesn’t go the way they want. In fact, most of them would deny Zoe the right to take their case to court at all. Perhaps, before any business takes their case to court, it should first be judged upon by a committee of UCD lecturers.

I have no idea what the judge will decide, and frankly I don’t care that much. But, all I know is this. If he comes down against Zoe, he’ll be considered the greatest thing since sliced bread by most of the posters here. If he comes down in favour of Zoe, he’ll be the object of vituperative attacks by the same posters on a Richter scale of 10 (gombeen man, FF hack, corrupt gobshite etc etc). Whether or not his decision was in accordance with the law won’t matter a toss.

In that case AIB and BOI are not Irish.

The point being an Irish or Finnish Headquartered business will look more favourably on their home location than a foreign one. The HQ alone gives serious levels of employment and benefits to the home country.

My problem with FDI is it seems to be fleeting with a lifespan of 10 to 20 years sometimes less. I hope your employer will be more permanent.

My personal belief is this country focused too much on FDI to the detriment of creating world class Irish businesses exporting round the world (and yes many of the shareholders may be foreign but the business itself would be Irish). The Scandanavians have done a pretty good job creating world class businesses.

As for your stats on exports I’m more interested in the prospect for recovery for if our exports have held up well (i.e were more recession proof) where will the recovery come from?

As for Zoe, the idea of examinership is for businesses with a realistic chance of turning around and repaying its creditors. In the case of Goodman their problems came from outside their core business – they started investing in Food Industries and got hit by loss of export credits for Iraq among other things. Their main business was sound and the banks in the end got a lot of their money back. I think they might even have taken a quasi equity stake if I remember rightly.

If you bring in the wider public interest (i.e non creditors) then the argument could be made it is right for the creditors to be at a loss if society in general gains. Capitalism doesn’t work that way and if we do go down that road it will make it harder for businesses to get credit. If we’re trying not to spook the international credit markets and investors this won’t be the way to do it.

Is it still possible to open an account @ ACC?

Perhaps as a method of protest at the actions of AIB ect for their preferential treatment of ZOE to the detriment of the wider public interest, people should look at removing their cash and placing it into a more ethical better run institution?

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