RABO AND EIB BACK CUT-PRICE AGRI-FOOD LOANS - The European Investment Bank (EIB) is partnering with Dutch lender Rabobank to provide €200m in cheap loans to Irish SMEs in the farming and food sectors.
The funds will be provided at a discount through Rabobank's vendor-financing operation DLL, with €100m being stumped up by each. The move comes less than six months after the two bodies established a €50m pool to deploy towards projects that could demonstrate a positive climate impact in Ireland, says the Irish Independent. "That went so well for them [DLL] that they've come back to us to look for an expanded package," said EIB vice-president Andrew McDowell. "We do lending through intermediary banks all through Europe. This is something we're trying to do more of in Ireland. To be frank, we didn't do as much of this as we would have liked during the financial crisis. This is an area of our business that we're trying to grow in Ireland and we'd like this to be a signal to other financial institutions that this form of lending from the EIB is available," he said. Mr McDowell said about 0.20% would be knocked off the borrowers' cost of funding as a result of the EIB finance.
CERBERUS SUBSIDIARY PAYS €3.5M IN TAXES - A company used by vulture fund Cerberus to buy property loans from Ulster Bank paid almost €3.5 million to the State last year as new tax rules for such investments kicked in.
Cerberus subsidiary Promontoria Aran paid Ulster Bank more than €1.2 billion in late 2014 for a group of bubble-era property loans dubbed Project Aran, giving the US company the right to demand repayment of the €6 billion due from the borrowers. According to accounts recently lodged for Promontoria Aran, it paid €3.47 million tax on the gains made on its investment during the year, says the Irish Times. Promontoria’s figures show that it paid the bulk of the tax - €2.7 million - between September 6th and the end of year, after the Government axed an incentive used by such companies to minimise their tax bills. The incentive, found in section 110 of the Taxes Consolidation Act, 1997, allowed companies to write off repayments on loans used to buy property debts from against their taxes. Promontoria Aran borrowed the cash to buy the loans from another Cerberus company in Holland and from Deutsche Bank. Last year it paid almost €48 million in interest on its debts, which were close to €1.2 billion.
SMALL HOTELS MOST IN DEBT, ACCORDING TO CENTRAL BANK STUDY - Overall debt levels for SMEs have fallen but small hotels and restaurants remain the most vulnerable, according to a new Central Bank study.
SMEs hold almost €16 billion in debt, down sharply from almost €27.4 billion over six years ago, according to researchers John McQuinn and Fergal McCann. But small hotel and restaurant firms were "particularly vulnerable" with the largest share of the most indebted firms. Dublin firms carried less debt than other firms across the country. The default rates on all SME loans which were more than 40% "have improved since 2013 through a combination of loan combination of loan sales, write-offs and loan cures" but "vulnerability remains a relevant concern in the Irish SME sector", the researchers said. "The accumulation of unsustainable levels of debt by firms was a key contributing factor to the financial crisis experienced in Ireland from 2008. A regular monitoring of indebtedness levels of real economy firms in Ireland is now seen as a crucial component of the Central Bank’s financial stability toolkit," the researchers said.
BREXIT BILL CALCULATIONS UNDERSCORE LONDON AND EU'S DIFFERING PRIORITIES - The true price Britain is paying to settle its liabilities to the EU will not be known for years to come.
But by ceding in recent days to the bloc's main financial demands, the UK has made the battle over the Brexit bill as much about presentation as hard cash. The blizzard of estimates of the burden the UK is about to assume - from €100 billion gross to between €40 billion and €65 billion net - largely reflects the different priorities in London and Brussels. For the EU side the objective is making the post-Brexit UK honour its share of outstanding EU liabilities and spending promises, which the bloc puts at around €100 billion in gross terms, says the Financial Times. A big breakthrough came last week when UK negotiators said they were ready in principle to recognise and pay all such obligations as they came due. Crucially that includes Britain’s €17 billion share of spending signed off in 2019-20, when the UK will have left the EU but plans to be in a transition phase. It had hoped that during such a phase it could avoid taking on new commitments. For Britain the priority is the net bill. The UK wants to highlight estimates that show how payments will be less than half the €100 billion liability once receipts such as UK projects have been taken into account. Ministers are banking on Treasury budget wizards making the exit price look as small as possible. Had there been a lump-sum Brexit settlement - in which all Britain’s debts were cleared in one go - the net estimates would have been crucial. But Britain’s offer to make good on commitments as they fall due - notably by paying pensions until the 2050s and beyond - is likely to transform the negotiation.