asked the Minister for Communications if he will confirm that the cost to the State of closing Irish Shipping is of the order of £48 million.
9.
Ceisteanna—Questions. Oral Answers. - Irish Shipping Closure.
8.
asked the Minister for Communications if he will confirm that the board of Irish Shipping unanimously recommended to his Department a restructuring of the company's affairs, prior to the company's liquidation; and if he will further confirm that the cost of such restructuring would now be of the order of £30 million.
10.
asked the Minister for Communications if he will confirm that the board of Irish Shipping unanimously opposed the liquidation of the company.
I propose to take Questions Nos. 8, 9 and 10 together. The liabilities of Irish Shipping Limited which were guaranteed by the Minister for Finance amounted to £39.5 million. It is now estimated that the guarantees which the Minister for Finance will be called on to discharge could be of the order of £36 million.
The position of the Irish Spruce remains to be finalised, but I can say that the liability of Irish Shipping Limited in respect of the Irish Spruce is £8.5 million.
Communications between the boards of State bodies and the Government are of their nature confidential and it would not normally be appropriate for me to disclose details of them. This must continue to be the position if the Government are to retain complete freedom of action at all times to deal with the major problems which they face in the commercial State body area. However, in view of the special circumstances which obtain in the case of Irish Shipping Limited, I am prepared to give the following information to the Deputy.
The board of Irish Shipping Limited put forward two options for consideration by the Government:
(i) the immediate winding up of the company; or
(ii) an attempt at a final renegotiation with the foreign shipowners with Government support.
The board expressed the view that, before proceeding to wind up the company, a final renegotiation attempt should be made. The board were only prepared to contemplate this renegotiation attempt first, if the Government agreed in advance to financial commitments (including the cost of a possible settlement with the foreign interests concerned) of £74.5 million; and secondly, if the desired result could not be achieved within the financial limit specified (and this the board felt was a very real possibility) the winding up of ISL would have to immediately follow.
The board of ISL were clearly pessimistic about the outcome of their renegotiation proposal. The Government, having carefully considered all options, made their decision. In the light of proposals made by the foreign interests concerned to the liquidator since he was appointed, it is clear to me that renegotiation of the charters on the basis of the cost figures envisaged by the board of ISL in their report to me could not possibly have succeeded. This more than vindicated the judgment of the Government.
Could the Minister confirm that the recommendation to the Minister from the board was a unanimous one, which would have included the chairman newly appointed to the company? Two options were put to the Minister. One was unanimously recommended to him and that was the one he chose to turn down. Could he confirm that that actually is the situation?
I have gone further than is normal already in relation to revealing details of reports of State bodies to the parent Department and the Minister. I do not propose to go further.
Would the Minister comment on information available to the Joint Committee on State-sponsored Bodies that a unanimous proposal from both the chairman and the board was put to the Minister that the company could have been kept in business for under £30 million, and that on receiving that advice the Minister still decided to liquidate the company? What additional advice had the Minister beyond the unanimous recommendation of the board and its chairman which led to the situation? It is quite clear that a figure of under £30 million as suggested by the board could have gone a long way towards restructuring the company so that it could operate on the basis of having two or three ships.
It is important that the figures quoted are accurate. Deputy Brennan has twice used the figure of £30 million, but he means an additional £30 million over the cost of the liquidation. The minimum price suggested by the board, including the cost of settlement with the shipowners, was £47½ million. We rejected that after careful consideration. Even Deputy Brennan will appreciate that once we made an offer we would have acknowledged a liability, which we were determined not to accept, and if we offered £74 million it would only have been a matter of negotiation upwards from that. Under bankruptcy law, between the appointment of a provisional liquidator and until he is made official three or four weeks later, there is more than enough time for creditors to seek a scheme of arrangement from the liquidator. In this case an attempt of sorts was made by some of the shipowners but the settlements they were seeking were too high. That more than vindicated the decision of the Government.
Is the Minister saying that the board were pessimistic about a possible renegotiation?
Yes.
You did not try a final renegotiation?
No.
I put it to the Minister that that is what should have been done. The cost of closing Irish Shipping, according to the Minister's reply, will be somewhere between £45 million and £60 million, and for an additional under £30 million the company could have been kept in existence with a smaller fleet. Did the Minister seriously consider that option even though the board may have been pessimistic?
I assure the Deputy that every possible angle of this was considered carefully. There were renegotiations at the beginning of 1984 on the basis that if they did not succeed the company would have to go into liquidation. They renegotiated a deal which at that stage it was hoped would keep the company going in 1985. In a matter of months it was clear that the assumptions that underpinned that renegotiation were not being realised and that the position was deteriorating rapidly and could not continue. It was not realistic for the board to come again on the same basis to renegotiate further. Our judgment was made in the knowledge that, if the shipowners were prepared to renegotiate and to offer a sufficient reduction in the tramp shipping rates, they could do so between the appointment of the provisional liquidator and the official liquidator. They did not do so; they came up with an offer which would have cost substantially more than the company or the board of directors suggested. The outturn of those discussions between the liquidators and the shipowners more than vindicated the Government's decision in the matter.
In connection with the last part of the Minister's reply, is there any reason why this House, as the responsible body, should not be made aware of the final proposal which the Far Eastern interest made which were reported to his Department while they were in the country?
If Deputy Wilson tables that question I will consider how much information I can give him.
This House is responsible, finally, for the money.
But that question is not before me.
It arises from the latter part of the Minister's reply. The Minister said that the Far Eastern interests made proposals but that they fell short. I submit that it is a reasonable question for me to ask what was the deal.
It seems to be a separate question.
The Minister mentioned——
It may follow from the Minister's reply, but you cannot pursue that ad infinitum and the Minister might not have the information with him.
He has no intention of going near ad infinitum.
The Minister mentioned the Irish Spruce in his reply and mentioned that the possible loss there would be £8 million, is that correct?
It was £8.5 million.
In the Minister's speech announcing the liquidation of Irish Shipping the Minister gave the House a figure of £38 million as being an early termination clause. The value of that ship is probably about £18 million and I make that an exposure by the State of £20 million, not £38 million.
This is where an understanding of the figures is very important. The Irish Spruce was in any event being paid for three-quarters by the State, one-quarter by my Department and half by the Department of Industry because of an arrangement that was made by the Government for the building of the Irish Spruce. It was in effect a shipyard subsidy. In any event, three-quarters of the price is being paid by the State and that would account for the £38 million.