Category: Archive

Business Briefs As interest rates fall, new threat from easy credit

February 16, 2011

By Staff Reporter

By Harry Keaney

With interest rates on mortgages at a record low in Ireland — now under 4 percent — the country’s largest building society, EBS, has warned that the low rates could lead lenders to give out too much money, possibly threatening the booming housing market.

"What happened in the UK after 1988 should be borne in mind," EBS’s head of lending, Martin Walsh, said. "They had huge problems of arrears and negative equity, which damaged the lives of many individuals and contributed significantly to their subsequent economic problems."

Walsh warned that borrowers should not get carried away with cheaper loans.

"Interest rates will rise again and to a point significantly higher than they are now," Walsh added. "It may take a couple of years, but rise they will. Debt servicing costs could be almost twice what they are now at some point in the future."

Walsh also warned that if housing prices keep galloping away, it means they will have further to come back. "There is no fundamental reason why prices paid for new houses should be any higher in five years time," he said.

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Elan’s new HQ

The pharmaceutical company Elan is planning to establish a new £100 million headquarters on the Belfield campus of University College in Dublin. According to news reports in Ireland, the publicly quoted company has agreed to build a 200,000-square-foot office and laboratory on land it will lease from the university for rent believed to be about £450,000 per year. Elan’s site in Athlone is mainly a manufacturing site.

Smurfit cost-cutting

The Smurfit-Stone Container Corporation has agreed to sell a newsprint mill in Newburg, Ore., for $220 million to the Southeast Paper Manufacturing Company, a partnership of Cox Enterprise, Media General and Knight Ridder.

In 1989, the Irish tricolor and the Stars and Stripes were flying side by side at the Newburg mill, though not in a celebratory mood. The occasion was a picket as a result of a dispute between union members and management over cuts in benefits. Workers at the plant were trying to attract attention in Ireland for their cause.

Smurfit-Stone Container is now paring its debt; the deal to sell the Newburg plant almost completes a plan to sell $2 billion in assets to reduce debt and concentrate on its packaging business.

A brief history of how Michael Smurfit built the business from his family’s paper plant in Dublin is contained in the Oct. 4 issue of Forbes. In the article, Smurfit, speaking about plant closings, is quoted as saying: "Sometimes you have to cut off a few fingers to save the whole body."

More insurance problems

People in Galway, Louth, Limerick, Meath, Kildare, Monaghan, Longford, and in some other areas, may may find it more difficult to obtain auto insurance from Guardian PMPA, Ireland’s largest auto insurer. The company, which was recently taken over by a French firm, is refusing to accept new business from these areas. The firm has also decided to drop some farm insurance policies.

Fergal Barry Murphy, financial researcher of the Consumer Association, said that by closing off sections of the market, the company was "giving the indication that all insurance costs are claim-related and, if this is so, we should see reduced premiums in areas where there are fewer claims."

A company statement said it had the widest acceptance criteria for motor risks and was continuing to quote for new business around the country, "although there may be specific individual cases where quotes are not offered."

However, an investigation by the Irish Independent newspaper found that motorists in several parts of the country were not entertained by Guardian PMPA once they disclosed the county they lived in.

IBO ball reminder

The Irish Business Organization of New York will hold its annual gala ball on Oct. 22 in the Grand Hyatt Hotel, in Manhattan. The IBO Business Person of the Year Award will be presented to Mayoman Sean James, CEO of Yonkers-based Irish Food Distributors. James, 35, is also involved in a number of other businesses.

The Celtic Spirit Award will be presented to Fr. ‘ngus Finucane, honorary president of Concern Worldwide (U.S.) Inc.

The Arthur Clements Awards, named after the County Down man who founded the IBO, will be presented to Patrick Comasky, president of IBS Building Service Contractors; John Corkery, owner of Twin Lakes Ski Park; Maura Kelly, a producer at Channel 13-WNET; and Kevin Tierney, marketing executive at Sumitomo Life Insurance Agency America.

Tickets for the ball cost $160 per person. Details, (212) 750-8181.

Tipperary jobs

Merck Sharp & Dohme is to invest £130 million and create 80 new jobs in its plant at Ballydine, near Clonmel, Co. Tipperary. The factory produces bulk chemicals for healthcare products.

Travel tip

Starting Nov. 4, CIE Tours International will operate a fully-escorted nine day tour of Ireland priced from $999, which includes airfare from New York’s JFK Airport, Newark or Boston. The price will be $1,069 from Chicago. Those who book 90 days in advance may save $60 per person. For details, call a travel agent or (800) CIE-TOUR of log onto www.cietours.com

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