Inside the world of business

T-bill auction could separate the Irish from the PIGS

THE DETAIL to watch in the results of today’s auction of treasury bills, which aims to raise €500 million in three-month borrowing, will be the yield or interest rate the State has to pay on the debt, how this compares with other sovereign states and where the lenders or purchasers of the bills are from.

Much fanfare was made earlier this year when the National Treasury Management Agency “top-sliced” or pushed out €3.5 billion of the €11.8 billion Government bond due to be repaid on January 2014 until the following year. This reduced the height of the first major debt repayment hurdle facing the State after the EU-IMF bailout programme expires at the end of next year.

But it transpired that most of those swapping debt out by a year were Irish banks that are either virtually or partially owned by the Government so it was hardly a ringing endorsement of Ireland’s economic prospects by the international investment community. It will be interesting to see how the rate on the new Irish T-bills will compare with the rates of our porcine colleagues, Portugal, Italy, Greece and Spain.

T-bill auctions are pretty low-risk borrowing. Portugal raised €1 billion in 18-month T-bills in April at a rate of 4.5 per cent after it accepted an international bailout. Even Greece auctioned T-bills as the country was embroiled in political chaos in May.

The Irish auction is a precursor to a sale of a much bigger bond with a longer repayment duration that is required by the Government later this year if the State is to have any hope of raising loans to meet more than €30 billion of repayments and funding requirements in 2014 and 2015 and avoiding a second bailout.

It’s certainly a case of dipping a toe in the water before a head-long dive. Prior to last week’s European policy shift towards splitting sovereign and banking debt in this crisis, some would have seen it as dipping a toe in bubbling lava.

Quote of the day

Clearly there were mistakes. Clearly there was behaviour that was reprehensible.

– Former Barclays Bank chief executive Bob Diamond testifying before the UK Treasury Select Committee


The European Central Bank’s governing council meets today with expectations growing that it will lower benchmark rates across the euro zone


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Video kills Quinns' starring defence against IBRC claims

THE DRAMATIC appearance of a video apparently showing Seán Quinn junior and his cousin, Peter Darragh Quinn, discussing their asset-stripping activities with people in a Ukrainian restaurant earlier this year, is a development that must have created great concern within the Quinn family camp for all sorts of reasons.

The two young men looking for a “box” (presumably a bank cash deposit box) in which to hold $100,000 which they are anxious not to bring back to Ireland lest the airport be filled with reporters waiting for their arrival, belongs in a film script from the In Bruges genre.

However the massive amounts of money involved in the Quinn/Irish Bank Resolution Corporation saga are a counterweight to the impulse to humour.

The Commercial Court was told by the bank yesterday that it believes the former director of the valuable Ukraina Shopping Centre in Kiev, Larisa Yanez Puga, was among those present at the meeting.

The two male Russian speakers who can be heard in the video have not yet been officially identified.

However it is understood representatives of the bank in Ukraine believe the content of the video supports the idea that the shopping centre is still in Quinn family control.

This is because one of the Quinns is heard saying at one stage: “Who’s the boss here?” It is a rhetorical question.

When one of the Russian speakers says: “We’re all part of a team,” Ms Puga is heard to respond, by saying to the Quinns: “We don’t need them.”

An issue that led to contempt findings last month against Seán Quinn junior and Peter Darragh Quinn was a trip they made to Kiev in August 2011 during which they met Ms Puga and after which $500,000 was transferred to her bank account.

The money in her account remains frozen following a subsequent criminal complaint by representatives of the bank.

Musical chairs for distressed debts

THE AVIVA offices at One Park Place off Harcourt Street in Dublin are a good example of the changes taking place in the Irish financial services sector.

Aviva is reducing its headcount by up to 720 through redundancies and employees who have already left the insurer. This has freed up space at the company’s large offices in Dublin. State-controlled bank Permanent TSB has also reduced staff numbers but has to beef up its collections team as part of the mortgage arrears resolution strategies overseen by the Department of Finance and Central Bank to grapple with the mortgage crisis.

The bank has just agreed to lease a floor of Blocks A and C in Aviva’s head office building, covering about 23,000 square feet, and will install there the bulk of the collections team that will be contacting struggling mortgage customers to deal with these distressed loans.

It’s only a few months since Permanent TSB was joined with an insurer, Irish Life, so it’s ironic that the bank should occupy new offices next to another insurer.

The deal makes sense given that Permanent TSB is tight on space in its head office around the corner on St Stephen’s Green and the bank is doubling the number of collections staff to about 220 to tackle the mortgage arrears cases over the summer months. And that’s just the bank’s own staff. The lender has also hired the UK-based Athena Credit Management and Risk Solutions to overhaul the collections process and change how it recovers debts from distressed customers.

There are a further 20 staff in Permanent TSB from Athena, led by Tony Lazell who has previously worked for Morgan Stanley, Cabot Financial, RBS and NatWest.

All these people need somewhere to sit as they work through the tricky task of deciding what mortgages will be repaid in full and what borrowers just have no hope of ever repaying their loans.

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