Dunnes winding-up petition in December:When is a company both “robustly solvent” and, under the terms of Section 214 of the Companies Act, deemed unable to pay its debts?

When that company is Dunnes Stores and it refuses to pay some €21.6 million to its creditor, insolvent developer Holtglen Ltd, over a debt for building works at a shopping centre in Kilkenny.

It is fair to say that Mr Justice Peter Kelly wasn’t readily embracing the logic of Dunnes’s argument, which had been earlier summed up by Maurice Collins SC, for Holtglen Ltd, as a “can pay, won’t pay” approach.

“I must say I find your client’s position difficult to understand,” Mr Justice Kelly told Brian O’Moore SC, for Dunnes , although he stressed he was not determining the issues of the case.

“Dunnes Stores is no different than any other litigant,” Mr Justice Kelly added, describing O’Moore’s claim that the retailer had been “stampeded” into becoming the development’s anchor tenant as “extraordinary”.

The retailer had not appealed a summary judgment issued by his court in March, after he dismissed Dunnes’s application to set aside an arbitrator’s award, and therefore the order to pay up was binding, the judge noted.

Dunnes preferred to concentrate on its concerns about the non-viability of the shopping centre, which is located at Ferrybank, Co Kilkenny.

Given that Dunnes is the anchor tenant in several Nama developments, the interests of the retailer and those of the State assets agency, which has taken over Holtglen’s loans, are very much aligned, the court heard.

Mr Justice Kelly did not seem especially keen to hear about the relative merits or otherwise of the development at this particular hearing, nor did he express any sympathy with Dunnes’s argument.

Instead, he observed that Nama’s position was “not unreasonable” in the circumstances.

“Nama, who are now effectively in the shoes of Holtglen, have said they are happy to talk to Dunnes Stores – but first the debt must be paid.”

The contested winding-up petition will now be heard on December 14th. The petition must be advertised by Dunnes seven days ahead of the proceedings so that any other creditors who want to, can come along and get involved in the motion to wind-up this “robustly solvent” company.

The judge’s word – “extraordinary” – seems apposite.

Spotlight still shines on agriculture

The failure to strike a deal on the EU budget last week has put the issue of the Common Agricultural Policy back into the spotlight.

The possibility that the CAP budget may be reduced now threatens to hang over Ireland’s presidency of the EU, even though the prospect of cuts seems to have receded since last week’s meeting.

Nonetheless, the issue highlights the importance the agricultural sector still holds in Ireland. Although the agri-food sector represents only about 7-8 per cent of GDP, its impact on the indigenous economy in terms of jobs and its knock-on effect on the local economy is enormous.

Unlike many multinationals, for example, Ireland’s agri-food industry sources the vast majority of its inputs from the domestic economy, generating significant economic impact.

The role of CAP in supporting Ireland’s largest indigenous industry is also worth keeping in mind as members of Glanbia co-op gather this week in Kilkenny to vote on the second part of the proposal on the hiving off of the company’s dairy division.

While the first vote earlier this month sanctioned the creation of a new entity, Glanbia Ingredients Ireland, in which Glanbia co-op will hold a 60 per cent shareholding, tomorrow’s vote essentially addresses how that new entity will be funded. A Yes vote will result in further offloading of Glanbia co-op’s shares to fund the new entity, leaving it on a more secure financial footing, as well as spinning-off of a proportion of shares to farmers.

With most farmers backing the first part of the deal, the second ballot is expected to be passed, although a hefty 75 per cent majority is needed.

While Glanbia plc has successfully developed into a world-class dairy nutritionals business over the last decade, it is worth noting the role Europe’s generous agricultural subsidies have indirectly played in that transformation.

Underpinning the success of Ireland’s agri-food industry is a protectionist system which heavily supports Ireland’s dairy farmers. Maintaining that financial support is an essential part of the Glanbia jigsaw as the company embarks on a new stage in its development.

Property prices head south again

The news that Irish property prices have fallen once again has been greeted with equanimity by the economic commentariat, although Davy warned that there might be further falls to come.

The broker takes the view that the dysfunctional nature of the market, combined with the low number of transactions, explain the gains in the previous two months.

“Our median price calculations from the Residential Property Price Register suggest that prices will fall further in November,” is the gloomy prediction.

It is not all bad news, though, according to Davy, which notes that sales this year will return to 2010 levels (20,000).

Goodbody Economics also valiantly looked for a silver lining in the figures and concluded that, while prices fell nationally, they remain almost flat in Dublin since the start of the year, once you exclude apartments. This, they argue, provides some comfort that the peak to trough fall in property prices will be within the assumptions made when the banks were recapitalised in 2011.

This point may be uppermost in the Government’s mind as it considered whether or not to introduce any more measures to support the market in the coming budget.

The two obvious levers are stamp duty and mortgage interest relief. Stamp duty is already at 1 per cent and the Government must be wary of cutting it further as it makes the job of putting it back up all the harder.

Mortgage interest relief is due to be phased out next year; Davy speculates that the weakness of the recovery may yet see it extended.

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