Morning business news - May 24Friday 24 May 2013 10.25
HOTELS' DEBT LEVELS MAY BE WRITTEN DOWN BY €2 BILLION - Multi-billion euro debt remains an issue for Irish hotels. A report commissioned by AIB says Ireland's 850 hotels share €6.7 billion worth of debt and that 300 of them are in financial difficulty. At the same time 54% of 111 respondents to a survey carried out as part of the research said their turnover had risen last year. Two thirds expect the tourism industry to grow over the coming three years.
Michael Vaughan, president of the Irish Hotels Federation, says that the level of debt among the hotels sector is not sustainable, adding that about a third of the debt will be refinanced with the exiting banks Bank of Scotland Ireland and the IBRC. "The exiting banks will probably write down debt to market value in order to exit. It could account for maybe €2 billion of the debt in total," he states.
Mr Vaughan says the hotel industry in doing very well in the city centres of Dublin, Cork and Galway, with the Dublin area ''booming'' as business tourism continues to drive growth. But leisure tourism outside of the main cities continues to lag, he adds. On the VAT issue, he says the IHF is due to present a major report to the minister on the matter. He says the lower VAT rate for hotels and restaurants should be maintained, adding that it is of particular benefit to the rural businesses. He also points out that when VAT was raised in Greece in order to bring in more funds for the government there, it actually had the opposite effect.
MORNING BRIEFS - Irish Drug company Elan is to issue $850m worth of new debt. The debt, with a coupon of 6.25%, matures in 2021. Elan has had a busy start to 2013. So far it has completed a $3.25 billion disposal of its stake in the multiple sclerosis treatment Tysabri, made a couple of acquisitions and is currently the subject of a multi-billion euro takeover bid.
*** Contact centre operator Abtran is expected to be awarded the the contract to manage the call centre for the new Irish Water. A spokesperson for Bord Gáis, which is responsible for establishing Irish Water, said a contract was expected to be signed in the coming weeks. Bord Gáis would not confirm the identity of the successful bidder for the tender but RTÉ News understands it to be Cork-based Abtran. It is anticipated Abtran will hire 100 new people within the coming months to begin preparing for the arrival of the first water bills in January 2015. The contact centre will require up to 400 new staff when fully operational.
*** Large multinationals may soon have to disclose the exact amount of revenue and profit they make and the amount of tax they pay in each EU country under new legislation being prepared by the Commission under the guidance of Internal Markets Commissioner Michel Barnier. The disclosure rules are intended to put pressure on companies which shift profit to low-tax jurisdictions in which they transact very little business and employ few if any staff. One of the unintended consequences of the legislation might be to give us an insight into profits made in Ireland by retailers such as Tesco, Marks and Spencer and others which are not currently required to disclose such information.
*** Spanish banks will have to put aside an additional €10 billion to cover expected loan losses. The country's central bank, the Bank of Spain, said lenders there have recently rolled over €200 billion worth of loans which were due to be repaid effectively extending the repayment period. The Bank of Spain believes at least €10 billion of that debt will not be repaid and it expects banks to make provisions to reflect that reality.