Inside the world of business
How do you solve a problem like Permo?
Irish Life & Permanent’s beleaguered bank Permo, which is to be jettisoned from the life business around the end of March, is the last of the banks to engineer a definitive plan for its future.
The Government sought to clear this up in the quarterly review of the bailout programme this week by saying that a plan would be agreed for State-controlled Irish Life & Permanent by the end of April and that the bank’s €4 billion recapitalisation would be complete by the end of June.
Irish Life will be sold eventually, but Permanent TSB is plagued with a large, mostly loss-making tracker mortgage book and the heaviest reliance on outside lenders among the Irish banks.
The Government is considering whether Permanent TSB should be left as a standalone bank or merged with another institution.
The absence of any kind of plan for Permanent TSB was the glaring gap when the Government announced the “two pillar” bank restructuring of the sector around Bank of Ireland and AIB after last year’s stress tests.
People in the know at the time suggested that Bank of Ireland might be an appropriate home for Permanent TSB after EBS was pushed into AIB.
But Permo was too broken to be saved by Bank of Ireland, which was itself not out of the woods. Now Bank of Ireland is only partially State-owned, which effectively rules it out unless Permanent TSB can be cleaned up.
One way of fixing Permanent TSB is to purge it of most or all of its tracker loans and warehouse them elsewhere for a time.
Goodbody Stockbrokers analyst Eamonn Hughes said yesterday the obvious candidates were AIB or Irish Bank Resolution Corporation, formerly Anglo Irish Bank, if the bank was to be run off.
In January 2009, Irish Life & Permanent floated an idea privately of parking €10 billion with newly nationalised Anglo – which could then use the loans to borrow from the European Central Bank.
Parking “non-core” loans is certainly preferable to selling them at fire sale prices, and IBRC already has Irish Nationwide mortgages.
Could it become a multi-storey for other unwanted loans?
Kentz may cut ties
Engineering group Kentz had orders worth $2.4 billion on its books at the end of last month, 50 per cent more than on December 31st, 2010. Both the $2.4 billion worth of orders and the $38 million profit it earned in the first six months of this year dwarf figures reported by its local subsidiary, Kentz Ireland, which has just filed accounts for 2010.
Those accounts show that the company lost €5 million in this country during the year and had net liabilities of €4 million. The accounts state that the company’s ability to continue as a going concern depended on the support of the parent entity, and they also say that that support was likely to be forthcoming. It also had a deficit in its defined benefit pension fund scheme of €6.4 million, around €3 million less than the previous year.
It was not a great result, but hardly enough to derail a FTSE 250 company with businesses around the globe. The results are, or course, historic, and over a year old and there’s a good chance that things have improved since then.
Kentz was originally a successful Irish engineering and construction company, but it expanded too rapidly, got into trouble and ultimately had to be rescued out of examinership by Malaysian group, Peremba, in 1994.
It worked its way back from that, and floated on London’s AIM in 2007. Now the group is focused on providing specialised construction, engineering and instrumentation services to the oil, gas and petrochemical industries.
The opportunities to serve the oil and gas industries in Ireland are not huge. Given the difficulty involved in getting the one decent natural gas find we have had in decades ashore, they are unlikely to get any better any time soon.
With its main businesses everywhere other than here, its listing in London and the small scale of its Irish operation, is it only a matter of time before it cuts its Irish ties altogether?
NEXT WEEK
Euro zone finance ministers meet on Monday with their colleagues from other EU states joining them on Tuesday at meetings to address ongoing efforts to curb the euro zone crisis. The focus of attention is expected to be a debt swap deal between Greece and its private sector creditors.
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