BARRY O'CALLAGHAN, the chief executive of Education Media and Publishing Group (EMPG), has told The Irish Timesthat he is not "broke" and he will honour every financial commitment on his investments, including the millions of euro owed to Anglo Irish Bank in relation to his equity stake in the educational publisher.
EMPG is in the middle of a financial restructuring that Mr O’Callaghan said would reduce his 21 per cent shareholding to “zero”. Mr O’Callaghan, from Cork, borrowed millions from Anglo to fund his stake in the business and said he would pay every cent back.
“I did borrow from Anglo Irish along the way. I’ve certainly had borrowings with Anglo Irish over the years as it relates to acquiring my ownership.
“But I’m not going to tell you the numbers. But what I can absolutely confirm to you is that I will be honouring all of the terms and commitments of my loan arrangements with Anglo Irish Bank.
“The fact of the matter is that I’m good for my money because I only speculated what I could afford to lose. I expect to honour every single obligation I have, not just with Anglo Irish Bank, but with lots of domestic and international banks. I’m not broke, I’m perfectly solvent. Of my various investments, some of them are up and some of them are down.
“But more importantly I run a company [EMPG] that I believe in the long run will be a great success. Unfortunately, today it means that a handful of us are out of the money on the equity side.”
Mr O’Callaghan said his holding in EMPG was worth “well north of $1 billion” on paper in August 2008, just before the credit crisis began and the education publishing market in the US collapsed.
“So nobody has lost more than me. But you’ve got to put this in perspective. I did the exact same as the smartest private-equity investors in the world and I created a capital structure not appreciating that there was a credit crisis just around the corner.”
This is a reference to two major deals that Mr O’Callaghan completed in 2006 and 2007. The first involved a reverse acquisition by his e-learning company Riverdeep of Houghton Mifflin in a transaction valued at $4.95 million.
The second was the acquisition of Harcourt for $4 billion in 2007.
This left the new EMPG with debts of $8 billion. Under the restructuring, this debt will be reduced to around $3 billion with its backers taking a bath on their investments. This includes private clients of Davy. The stockbroker said yesterday its clients invested $170 million in EMPG in 2006 and not the higher figures that have been widely reported.
Mr O’Callaghan insisted that the 450 new jobs to be created at its RD office in Dublin would go ahead. This has received backing of about €30 million from Enterprise Ireland in grant aid.
“We have taken that money and created 150 sustainable jobs, which aren’t going to be in any way affected by this restructuring. There aren’t too many companies creating that type of employment in Ireland today.”
Mr O’Callaghan is disappointed by the negative coverage here of his involvement with EMPG.
“People are perfectly entitled to take a swing at me because I’ve lost them money and I’m disappointed, too. But don’t blame me for what I don’t control. This downturn wrote off the equity of lots of leveraged businesses.”
Mr O’Callaghan said EMPG employs about 300 people here. He also has 150 workers at his Cliff House Hotel in Waterford and at Bentley’s Hotel in Dublin.
“I’ve paid tens of millions of dollars worth of tax in Ireland,” he added. “I spend about 50 per cent of my time offshore, mostly in the US but I’m Irish domiciled and I pay my taxes here.”
