Cantillon

Inside the world of business

Sale best option for Shelbourne Hotel

THERE IS a hint in the latest accounts for Kantaka, the holding company of the group that owns the Shelbourne Hotel, that it could have to sell the property.

Businessman John Sweeney and property players Bernard McNamara, Bernard Doyle and David Courtney bought the hotel in 2005 for €140 million. Their holding company’s accounts for 2008, which have only become available now, show that it completely wrote off the value of an €820,000-plus investment in Shelbourne Hotel Holdings, as the directors believed it was worthless.

The picture that the accounts paint is not pretty, nor is it terribly clear. Auditors Horwath Bastow Charleton point out that the financial statements are not consolidated and say that, in this respect, the accounts do not present a true and fair view of Kantaka’s affairs.

Its subsidiary, Shelbourne Hotel Holdings, has yet to produce accounts for 2008, but at the end of 2007, it owed the banks €116 million. There’s no way of knowing how things have gone since, although the directors cited “the financial performance of the subsidiary undertakings” as one of the factors behind the decision to take to zero the value of its investment.

Kantaka’s accounts were signed off at the beginning of the month. The directors, including Doyle, Sweeney and Courtney, say that the company’s shareholders and banks will continue to provide working capital “until such time as future options for the company are finalised”.

There aren’t too many future options. Nama owns at least part of the debt, Sweeney’s Blackshore Holdings is in liquidation and McNamara’s troubles are well documented. It’s time to admit the game is up and look for a buyer. While the State has more hotels than it needs, the Shelbourne hardly fits into the zombie bracket. It’s bang in the centre of Dublin and has one of the strongest brands in its sector. It may not be worth its 2007 carrying value of €238 million, but a deal represents the taxpayer’s best chance of recovering the loans we have bought. Unless, of course, the State wants to add a prestige hotel its portfolio of broke banks.

Familiar ring to EU plans to deal with troubled banks

AILING BANKS taken under state control; dividends suspended; assets sold; insolvent lenders wound up – the European Commission’s proposals for a framework for dealing with troubled banks all sounds very familiar.

And so it should. The drawn-out collapse of Anglo Irish Bank has obviously been to the forefront of Michel Barnier’s mind as he framed his proposals, which were published yesterday.

The obvious question is whether or not the framework would have made any difference had it been in place three years ago. Specifically: would the bill for Anglo Irish Bank still be heading towards €35 billion? They answer to the first is “yes” and the second is thus “no”. The key differences would appear to be the speed at which the bank would have been dispatched and also the sharing of the cost.

Instead of stumbling around doing everything it could think of to avoid facing up to the fact that Anglo Irish Bank was bust, the Government would have had the matter taken out of its hands.

This would undoubtedly have brought things to a head sooner, but the eventual bill might not have been any smaller, although there would have been no dispute as to whether the unsecured bondholders had to share the pain.

Crucially, the losses on wind-up would have been met by a fund established through a levy on European banks based on their balance sheets.

However, given what happened here it’s hard to see the proposals becoming law without some sort of provision to limit exposure to any one bank or any one state.

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