Another good week for Nama?
Cantillon: a muted welcome for plans to resurrect the U2 tower
This could be seen as a one-off, simply a cash-strapped Government looking for money from whatever source is available to it. But there was an interesting line in the ESB’s statement dealing with Rabbitte’s letter.
This was to the effect that the Government and NewEra are jointly reviewing a dividend policy for the ESB.
The Minister intends getting in touch with the State behemoth again to discuss this further.
This all harks back to a report into State-owned companies and assets completed by a group chaired by economist Colm McCarthy. The report was commissioned and published during the lifetime of the last government, but provided the template for the current administration’s disposal strategy, including the aborted plan to sell Coillte’s harvesting rights.
Another point it highlighted was the need for measures designed to ensure the State gets a bigger share of its companies’ profits. It appears that the current Government has taken this suggestion to heart as well.
New Homebase bidder changes game
The emergence of an as yet unidentified “independent” potential bidder for Homebase’s Irish stores was clearly not part of the Home Retail Group’s cunning plan. They presumably had hoped to follow the path beaten by B&Q which bought its Irish business back once the leases on its stores had been renegotiated for it by an examiner.
Homebase clearly had its problems here. Sales had fallen by 31 per cent since 2009 and the business had been unprofitable for each of the past five years despite remedial action taken by management. It is arguable that what it is doing is is a misuse of the examinership process but at the same time it is a pragmatic solution to the problem created by the widespread inclusion of upward-only rent reviews in boom-time leases .
These, combined with unrealistic expectations on the part of landlords, particularly when the tenant is a blue-chip international retailer, have left the likes of Homebase and B&Q with few other options. It is also worth noting that the restructuring of B&Q involved the writing off of a significant amount of intercompany debt and something similar is on the cards with Homebase.
But as yesterday’s news reminded us, examinership is a court process and the object is to preserve the company, rather than facilitate the restructuring of Irish subsidiaries of UK multiples.
The examiner Kieran Wallace (left) will presumably have to bear this in mind when he judges which of the two proposals is the most viable.
That said it is hard to see anyone trumping Homebase’s UK parent, not least because it is the biggest creditor of the Irish operation and as such can oppose any scheme. Although it would find itself in a tricky situation having triggered the examinership to begin with.
It promises to be interesting and much will depend on who the mystery investor turns out to be. Should they be revealed as another international group that would have the capacity to step into Home Retail’s shoes in Ireland it could leave the Milton Keynes-based group with a lot of egg on its face.