The agony and the ecstasy of 2013
We look at the winners and the losers of the year
Yes or No.
The financial crisis has certainly taken its toll on Irish business. Businesses have been lost. People have gone bust. Reputations have been damaged. A few have been jailed. It was not all bad in 2013, though.
It was the year when Ireland exited the bailout. Deals were done. The Irish abroad did well, as did those in the export business.
Some of the pre-bust big hitters are back making money. As importantly, a new generation of entrepreneurs forged in the crisis is emerging. Credit is still hard to find for business and it is certain that next year will continue to create many more losers. There is much still to fix in the economy, but next year certainly bodes better for Irish business.
And so we list the winners and losers of the past year . . .
“[He] can smell money like a shark can smell blood.”
Developer Simon Kelly described boom-time financier Niall McFadden thus in his 2010 book Breakfast with Anglo. On June 10th this year, however, it was McFadden who found himself in trouble when he went bankrupt after failing to strike a last-ditch deal with his creditors.
McFadden advised on the take-private of e-learning company Riverdeep before moving on to to help Richard Nesbitt buy out Arnotts. The financier loaded the 140- year-old department store up with hundreds of millions of euros of debt causing it to be sold off by its banks in December at a discount.
In August, the investment vehicle he founded, Boundary Capital – renamed Fleming Capital later – collapsed, leaving the former Anglo Irish Bank with a €41 million bill. The previous year Siteserv, a utilities company McFadden once backed, was sold at a €90-million discount, another big loss for the taxpayer-owned bank.
McFadden now spends much of his time in Mayfair, in London. He is already rumoured to be planning his comeback.
Thomas Byrne always cut a dapper, if eccentrically dressed, figure in recent years, serving coffee or tea in Dublin’s Foam Cafe. Under the pseudonym Sebastian Hobert, he busied himself while awaiting his massive trial for fraud and theft offences totalling €52 million. At the start of December, the 47-year-old was convicted and jailed for 12 years.
His 27-day trial revealed Byrne to be a man who could dupe his bankers and clients into believing he was a representative of a “French fashion house”.
It wasn’t just gullible banks he fooled, however. He also defrauded the elderly and the bereaved.
Byrne’s account of why and how he ran into trouble was like an episode of Love/ Hate. As the trial unfolded, he arrived daily in an ever-changing wardrobe that attracted comment from fashion writers.
No flamboyant jacket or boldly coloured tie could distract from the truth, though; from his solicitor’s office in suburban Walkinstown, he cost his clients millions and badly damaged the reputation of the legal profession and its compensation fund which, so far, has coughed up €7.2 million to his victims.
In his own words, former RSA Ireland chief executive Philip Smith is the “fall guy”. On November 28th, he quit his position not long after RSA announced an investigation into the insurer’s accounting practices.
Smith said he left to protect his “traumatised” family and “to pursue justice outside the current flawed process”.
On Friday, December 13th, RSA, Britain’s largest non-life insurer, said the total required to recapitalise its Irish unit was £205 million. It said it felt RSA Ireland had not put enough cash aside to meet expected claims. To put it into context, the Irish business, which accounts for only 5 per cent of group revenue, is set to wipe out about two-thirds of RSA’s expected earnings in 2013.
Towards the end of 2012, Smith boasted that there was a “buzz” in its Irish office and this was backed up by regular Gallup surveys which asked questions like “Do you trust management and the way they’re going?”
As RSA’s almost 1,000 staff fret about their future this Christmas, it is doubtful its top brass as are as eager to gauge their opinions now.
Smith has described his instructions from his FTSE 100 parent on taking the top job in Ireland in 2007 as being simple: “Take it to the next level”.
What this meant exactly will be something pored over closely in 2014. The fact that RSA group chief executive Simon Lee has also resigned and that the company announced a “full group review” of its business suggests that whatever happened appears to be bigger than just one man.
“Love and affection, and children” are the self-confessed ingredients for happiness for Carlow-born developer Seán Dunne. In return Dunne gifted his wife Gayle Killilea, a former journalist and socialite, €100 million in 2005, a fifth of his then fortune.
Known as the Baron of Ballsbridge, after spending of half a billion euros on seven acres of land in Dublin 4 during the boom, the fall of the “Dunner” in the bust has been quite the soap-opera.
In March, Dunne filed for bankruptcy in Connecticut on Good Friday 2013. In an extraordinary soliloquy published in a Sunday newspaper, he described himself as the “Ace of Spades” being hunted by Nama and Ulster Bank in the US, like Saddam Hussein was pursued by the Americans in Iraq.
Nama, however, has not given up on Dunne. It contends that he has fraudulently transferred some assets to Killilea, a claim the couple vigorously deny. For going bankrupt, Dunne wins the loser gong. His wife, however, remains very much a win.
Founder of Payzone, a mobile top-up and e-payment provider, John Nagle joined the “bankrupt in Britain” brigade.
Nagle founded telecoms provider ITG in 1989 and built the company into stock market-listed Alphyra.
In 2003, he led a €88 million management buyout and then completed a €300 million merger with Cardpoint, a listed ATM operator at the end of 2007. His timing could not have been worse and Nagle was fired by his shareholders in early 2008 as the merged company struggled to manage its debts.
Nagle’s 11 per cent stake was wiped out when the company was restructured in 2010, leaving him with no means to service his business and property-related debts. Detractors of the tech entrepreneur might say Nagle was difficult but he was also undoubtedly a hardworking entrepreneur who created his business from scratch. He’ll be back.
And the winners . . .
Tipperary man Patrick Joy has built a business with a turnover of €70 million making tanks to transport chemicals to oil rigs from its headquarters in Dunleer, Co Louth.
Founded in 1995, Suretank employed 14 people in year one and had sales of €1 million.
Today it has 600 people in Dunleer, Aberdeen, Bangkok, Zhongshan, Bergen, Perth, Rio de Janerio and Houston.
From Co Louth, Suretank designs products that can survive as easily in the Arctic Circle as in the Indian Ocean.
In July, Joy sold a majority stake in Suretank to HitecVision, a Norwegian investment company, for €35 million. The deal valued the overall business at €52 million.
Joy stepped down as chief executive but he remains Suretank’s chairman and a 26 per cent shareholder in the company. In October, he was named EY Entrepreneur of the Year 2013 at a gala awards ceremony held in Dublin.
Kieran Wallace and Eamonn Richardson cannot have enjoyed the last year. Liquidating a bank like IBRC, the former Anglo Irish Bank, at short notice, was a Herculean task. N
onetheless, getting the gig last February for KPMG was a big coup. The fees involved, rumoured to be well into the tens of millions, must have pleased the accountancy partnership led, since May 1st, by Shaun Murphy.
It is too early to say definitively how well KMPG has performed its task. It was certainly a success to sell 84 per cent of IBRC’s €2.5 billion face-value trading business loan book.
The level of interest and standard of bidders attracted indicate that KPMG did its job – helped by the impeccable timing of running the sales process just as Ireland exited the bailout.
KPMG now moves on to sell IBRC’s commercial property loans and Irish Nationwide’s mortgage book.
Wallace and Richardson are winners this year. Next year may be more tricky: a legal quagmire could await as it faces a serious legal challenge from Paddy McKillen and other borrowers.
Dealing with the legacy of Michael Fingleton’s Irish Nationwide (which KPMG once audited) will also be a handful. Much still to do, and staying in front will be the challenge.
Ireland’s exit from the bailout without a precautionary credit line is a testament to the hard work of John Corrigan, the chief executive of the National Treasury Management Agency (NTMA) and his team.
In March, the NTMA returned to the capital markets for the first time since the State’s bailout in 2010 with a €5 billion 10-year bond.
The bond was named as bond of the year in December by the International Financing Review. In total the NTMA has raised a cash pile of €25 billion leaving the State fully funded until the first quarter of 2015.
When Ireland entered the bailout, analysts were likening the State to a basket case. Corrigan and his small team circled the world meeting investors until the market began to trust us again.
Corrigan also helped set up NewEra to oversee five commercial semi-states, which sold Bord Gáis Energy before Christmas. He is also involved in turning the National Pension Reserve Fund into the Strategic Investment Fund to help provide some badly needed economic stimulus.
Fiercely intelligent but also down-to- earth, Corrigan was tipped last year as a potential future chairman of AIB. It would be a step down, although perhaps a step up in wages.
Irish tech start-ups
The can-do attitude of Irish start-ups has been a bright light in Ireland’s business year. Determined, hardworking and optimistic Ireland’s new tech entrepreneurs have had a good year.
Brett Meyers, the chief executive of Dublin-based CurrencyFair, sums up what can be done. He started the year with seven staff, which grew to 28; he then announced plans to hire 30 more after raising $2.5 million from Frontline Ventures and some angel backers.
CurrencyFair has allowed users to save money by peer-to-peer exchanging over €700 million in different currencies.
Soundwave, a music discovery app, led by Brendan O’Driscoll, only launched in June but already 750,000 people have downloaded it. It raised €1.1 million in June from investors such as Mark Cuban, owner of the Dallas Mavericks basketball team, and ACT Venture Capital.
Pat Phelan’s Trustev, an anti-fraud online company, raised $3 million from international and Irish backers in a year when it was also won the European Commission’s Tech All-Star Award.
Further afield in California, Limerick’s Patrick and John Collison’s Stripe, an online payments start-up, is already being valued at $500 million. It is not all gloom.
Aviation entrepreneur Declan Ryan is our final winner in 2013. During the summer, VivaAerobus, the Mexican airline he has backed since 2006, was tipped as a future flotation candidate by Bloomberg.
In October, Ryan was in Mexico to sign an order worth €3.2 billion for 52 Airbus aircraft by the Latin-American airline which carries almost five million passengers a year. The order was the largest yet by a single airline in the region.
Ryan is also an investor in VivaColombia,a year-old carrier based in Medellin, Colombia, which promises to shake up its local market as well as having stakes in airlines in the Far East.
Closer to home, Ryan’s investment company Irelandia invested in a Dublin biofuels company called Aer Sustainable Energy Ltd and indirectly via Frontline Ventures, in a portfolio of half-a-dozen start-ups. It is away from traditional business, however, where Ryan made his greatest impact.
At the end of 2013, Ryan’s venture philanthropy fund One Foundation closed quietly. His small team has made an immense impact on the Irish charity sector which goes far beyond giving away tens of millions. Ryan and his co-founder Deirdre Mortell and senior management brought business planning and skills to the sector which will survive long after the closure of One.