Mixed messages from Europe on debt
Cantillon:Ireland remains twisting in the wind following the leaking of a draft report on how the new European Stability Mechanism would get involved in bank rescues.
According to the draft report, problem countries would either have to invest alongside the ESM or guarantee the ESM for any losses it might incur as a result of bailing out member states’ banks.
Reconciling this proposal with the European Council’s commitment to break the toxic link between busted banks and indebted sovereigns is not easy. Little wonder, then, that the commission’s spokespeople did not bother trying when questioned yesterday.
They chose instead to repeat the European leaders’ promise “to break the vicious circle” which had been reiterated as recently as December 14th.
It is all somewhat Jesuitical and leaves open the prospect of some sort of fudge that will neither convince the markets nor lift the burden on the Irish exchequer and make Ireland’s debt sustainable.
However, the game is far from over and Ireland continues to exert what pressure it can. Stefan Gerlach (pictured), deputy governor of the Central Bank, was doing his bit in this regard yesterday when he gave the Berlin Finance Lecture organised by Deutsche Bank and Humboldt University .
“The stock of public debt is very large, the level of mortgage arrears is still high and banks are not yet profitable, The safety margin is therefore small,” he told the assembled – mostly German – “politicians, regulators, industry representatives and academics, before concluding that debt sustainability would greatly enhance the prospects of a successful exit.
Ardagh to add yet another touch of glass
Fresh from three acquisitions last year, glass bottle and metal container group Ardagh yesterday announced that it is close to getting another one in the can.
The group confirmed that it has offered €1.275 billion to buy Verallia’s US operations from Saint-Gobain.
It plans to pay for the deal, which has first to get the green light from US regulators, by issuing $1.45 billion in euro and dollar bonds.
Since it purchased Impress Co-operative in the autumn of 2010 for €1.7 billion, Ardagh has been steadily buying up rivals, building a business that now has sales of €5.4 billion a year and a list of blue-chip clients, such as Budweiser owner, InBev; its rival, Heineken; and Coca-Cola.
It has borrowed money to pay for many of these. It paid for Impress through a bond issue combining €1 billion and $800 million.
Early in 2011, not long after it announced the Impress deal and associated bond issue, it borrowed a further €200 million to finance more acquisitions.
Last year, when it announced that it was buying Anchor Industries for more than €700 million, it said it would finance the deal through a $920 million bond.
When it went to the market, the offer was eight times oversubscribed, meaning that, in theory at least, it could have raised in the region of €6 billion.