I move:
That Seanad Éireann approves the following Order in draft:
State Guarantees Act, 1954 (Amendment of Schedule) Order, 1981
a copy of which Order in draft was laid before the House.
State Guarantees Act, 1954 (Amendment of Schedule) Order, 1981: Motion.
(Cavan-Monaghan): This resolution arises from the recent restructuring of the particle board firm at Scarriff, County Clare. On 26 March 1981 the Dáil approved a supplementary forestry estimate of £1,293,000 in this context.
The difficulties experienced by the chipboard industry in Ireland over the past decade resulted in the closure of three of the country's four mills, the exception being Chipboard Ltd, Scarriff, which was in receivership since April 1980 and which remained in production through State assistance to the receiver.
The package for restructuring this firm involved the setting up of a new company, namely Chipboard Products Limited, in which the Minister for Fisheries and Forestry became the major shareholder. Very briefly, the restructuring arrangements, which were completed on 13 May 1981, involved an agreement between the Minister for Fisheries and Forestry and a local consortium to purchase the assets of Chipboard Ltd, in receivership, and form a new company to carry on the business of particle board manufacture at Scarriff. The board of the new company consists of four State directors and three directors representing the private investors. The company have an ordinary share capital of £527,000, of which the State subscribed £334,000 and private shareholders provided £193,000. There is provision for a share option scheme which, if taken up, would increase the private share capital to £231,000. The State also subscribed at par for £200,000 15 per cent redeemable cumulative preference shares.
A loan of £466,000 for a period of 12 years was provided by the Department of Fisheries and Forestry and there is provision for capital grants, totalling £1,012,000 over a three-year period, of which £293,000 was included in the Supplementary Estimate. The package also incorporates a timber supply agreement with the new company whereby the Forest and Wildlife Service will continue, for a period of three years, an arrangement whereby the existing firm were paid to harvest a proportion of their wood requirements from State forests and allowed to remove the wood free of charge.
Apart from the direct financial investment and timber supply agreement referred to, the State agreed to guarantee £400,000 of a bank loan of £750,000 to the company. This guarantee necessitates an appropriate amendment of the Schedule to the State Guarantees Act, 1954, and it is specifically in this context that the resolution now before the House arises. Before any moneys from the loan can be disbursed, approval of this amendment is necessary in order to legalise the guarantee. There is an urgency about the matter inasmuch as it is envisaged that the company will require to draw down on the bank loan in the very near future. I recommend the resolution to the House.
This arises from earlier commitments. I welcome the proposal and I give it our support.
(Cavan-Monaghan): I thank the Seanad for giving this resolution the approval which is required for the purposes I have outlined. Since no question of a controversial nature has been raised it is not necessary for me to say very much. As the House will see, this arrangement is somewhat unusual inasmuch as the company are now virtually a State enterprise. The company in Scarriff got into trouble to such an extent that they could not carry on.
The House might wonder why the necessary assistance was not provided by the Industrial Development Authority or Fóir Teoranta. I understand that Fóir Teoranta did their best to assist the company when they were in difficulties but decided that the company, as then structured, could not be made viable. The Industrial Development Authority did not see fit to intervene. One might ask: why did the Department of Fisheries and Forestry intervene? The reason is that that Department could provide the raw materials—the timber necessary for the continuance of this undertaking.
The firm are now virtually a State enterprise. The State has provided equity capital to the extent of £534,000. There is also a departmental loan of £466,000. Grants have been provided over a period of three years to the extent of £1,012,000 of which £293,000 was provided in the Supplementary Estimate. The State is also guaranteeing a bank loan of £400,000 under the State Guarantees Act, 1954. We are now authorising an amendment to the Schedule of that Act to enable the State to do this. That £400,000 is part of a loan of £750,000. The State is guaranteeing £400,000 of it. Private capital has been provided to the extent of £193,000. Private investors have an option on a further £38,000 of shares if they wish to take that up. As well as the loan we are dealing with here, the £750,000 of which we are guaranteeing £400,000, the private shareholders have provided £57,000 by way of loans. In addition to what I have said, the State is providing timber, the raw material, over the next three years free of charge to the company. In fact they are paying the company for half of this. In other words, they are making the timber available free of charge and paying the company for taking it away. I thought I had better spell that out because that is the position. That was done for two reasons. There were 200 jobs at stake and about 150 jobs will be saved by doing this. If the company proceed satisfactorily there will be a market for forest thinnings in later years.
I did not have time to speak at length on this in the Dáil. This arrangement was entered into by the previous Government and the previous Minister for Fisheries and Forestry is a party to the agreement which provides for the guarantee which we are now providing. I sincerely hope that things will go well for this company in Scarriff which has taken over the chipboard factory there. My Department will certainly be monitoring the activities of the company in the years to come and I hope that the company will justify the confidence placed in it. The principle involved is a good principle. There is a mixture of State enterprise and private enterprise and that is good.
Again I want to thank the House for giving me this motion without any debate or without any delay.
Question put and agreed to.
The Seanad adjourned at 7.25 p.m.sine die.