Committee Reports > List of Committees > Joint > 1985 > Committee on Commercial State-Sponsored Bodies > Report No. 02 - Irish Shipping Limited

APPENDIX 2

LETTER TO CLERK TO JOINT COMMITTEE FROM CHAIRMAN, IRISH SHIPPING LIMITED

Further to your suggestion that I attend at a private session of the Joint Committee meeting on Tuesday, 13 November, I subsequently received on 5 November a letter from Mr. Michael A. Kehoe enclosing a very detailed list of draft questions to be put to me.

Having now had an opportunity to consider the scope of these questions it appears to me that it is necessary that I obtain legal advice before I can respond to the matters in issue.

In these circumstances I do not believe that it is appropriate for me to attend before your Committee tomorrow as proposed.

I would of course be prepared to appear at a mutually convenient future date when the position has been clarified. In the meantime, I would appreciate your conveying to the Committee members my apologies, which I trust in the circumstances they will understand.

Yours sincerely,

F. E. BELTON,

Chairman,

12 November, 1984.

LIST OF DRAFT QUESTIONS REFERRED TO IN LETTER FROM CHAIRMAN, IRISH SHIPPING LIMITED,

DATED 12 NOVEMBER, 1984

1.The projected trading losses for the calendar years 1984 and 1985 are £15.97m and £11.533m. Do you consider that these projections are a reasonable estimate of the projected results?

2.Has there been any significant increase in charter rates and/or when is there likely to be an upward movement in the trend?

3.Has there been or is it likely that there will be any improvement in the financial affairs of Reardon Smith which would be of benefit to the Company?

4.Is it now likely that the disposal of assets i.e. the Irish Maple etc., will realise £4m and that Oceanbank payments will be £4.5m in 1984 as outlined in the projected cash flow statements? If not, will additional funds have to be borrowed?

5.In analysing the annual reports and accounts of the Company it is difficult to ascertain the return on the investment. How, therefore, do you consider that these investments should be evaluated. (Subsidiary and Associate companies)?

6.While the Joint Committee was not informed of the details of the re-negotiations that took place with the owners of the chartered ships, did the $42m paid for the two ships relate solely to them or was a portion of this expenditure related to deferred payment arrangements?

7.Loans amounting to £31m in the case of the Group are secured by Government guarantees, plus £9m in relation to the Company’s portion of its liability arising from the Irish Spruce as at 31/3/84. Of the £73.6m in the balance sheet is the Government’s total exposure by way of guarantees the aggregate of the above amounts i.e. £40m?

8.In addition to the Government guarantees listed above it also provides for an off balance sheet guarantee relative to a net liability of £30m associated with the Irish Spruce. Do you agree?

9.Do you agree that, therefore, the total state exposure by way of Government guarantee at 25/7/84 is -

10.An analysis of the loans of £73.6m shows the following:

How does the company propose to meet these repayments?

11.The estimated forward financial commitments under the chartering arrangements for the seven vessels (i.e. 3 Panamax and 4 Handysized) would be approx. £120m at June, ‘84, assuming Reardon Smith do not make any contribution. Would you agree with this estimate?

12.Do you consider than any meaningful results could be achieved in seeking to further re-negotiate these chartered rates with the owners in the light of the company’s serious financial position?

13.In reviewing the Company’s balance sheet as at 31/3/84 it is noted that the total assets are valued at £83m which are basically financed by way of loans of £73.6m. If the company were to cease trading would it be reasonable to assume that the realisable value of these assets would be in the region of £50m and that, therefore, the Government guarantee of £31m would be called up to meet the deficit on closure?

14.If the Government and the company were to meet their liability under the “Bareboat Charter” arrangements of the Irish Spruce, which at 25/7/84 had an early termination penalty of £38.8m, and assuming that ownership would be transferred and that the ship could be sold for £18m, do you agree that there could be a write off of £20m on this transaction?

15.Relative to the chartering commitments of £120m approx. and in the event of closure and assuming that these liabilities were met, and that the equity interest in the three vessels could be realised for £25m and that no meaningful concessions were obtainable or that Reardon Smith made no contribution, the net cost of doing so would be £95m. Do you agree with this net cost estimate?

16.Assuming that all creditors were met in full, do you agree that the cumulative effect of the above assumptions relative to closure could cost £146m? -

17.While recognising the volatile nature of international tramp shipping and the declining costs associated with the forward chartering commitments, can you forecast the profit/loss of the company over the next ten years?

18.When do you foresee that the company’s extremely weak balance sheet position can be rectified and how?

19.Have your board considered disposal of all or part of your subsidiary companies’ interests and/or the sale of your investments in associated companies?

20.What are the short and long term plans to deal with the serious problems of the company?

21.Do you consider the financial mechanism of guaranteed borrowing to be an appropriate method of dealing with the Company’s problem?

22.Are you aware of the authorisation procedures adopted relative to the charter commitments entered into by your company -

(a) only by Irish Shipping Limited

(b) in conjunction with Celtic Bulk Carriers?

2/11/84

LETTER TO CHAIRMAN, IRISH SHIPPING LIMITED, FROM CLERK TO JOINT COMMITTEE

The Joint Committee had your letter of 12 November, 1984 before it at its meeting yesterday.

I am to state that the Joint Committee was disappointed that you did not find it possible to attend. The Joint Committee is currently in the process of completing its report and it believes that it would be of mutual benefit to have a discussion with you in private session before finalising the report. Insofar as there may be legal difficulties with regard to the answering of questions I am to state that the Joint Committee would have no objection if you wished to be accompanied at the meeting by your legal adviser. Furthermore, the Joint Committee would not deem it inappropriate for you to specify matters which you would not feel free to discuss.

Having regard to the foregoing, the Joint Committee hopes that you will attend its next meeting at 4 p.m. on Tuesday next, 20 November, 1984. The Joint Committee is particularly interested in discussing the details of chartering arrangements entered into by the company and indirectly through Celtic Bulk Carriers and in this connection it would request that the officials associated with the chartering arrangements would also attend the meeting.

Yours sincerely,

C. O’BRIEN,

Clerk to the Joint Committee,

14 November, 1984.

LETTER TO CLERK TO JOINT COMMITTEE FROM ARTHUR COX & CO., SOLICITORS

RE: IRISH SHIPPING LIMITED (IN PROVISIONAL LIQUIDATION).

On the 12th November, 1984 we received from the Chairman of Irish Shipping Ltd. copies of communications, correspondence, etc. relating to the deliberations of the Committee, requesting certain advice in relation to same. Since then, as you will be aware, a Provisional Liquidator has been appointed to the Company and the winding-up Petition is due to be heard by the High Court on the 3rd December.

We have now been consulted further by Mr. Belton on your letter received by him late on Wednesday afternoon the 14th November requesting his attendance before the Committee on Tuesday the 20th November. However, it appears to us that, in the light of the appointment by the High Court, and the fact that the powers of the Board have now devolved upon the Provisional Liquidator, it would be wholly inappropriate for Mr. Belton to deal with any matters arising on the affairs of the Company. As you will appreciate, all the files, books and records of Irish Shipping Ltd. are now under the control of the Provisional Liquidator and he is the only person at this stage who can properly represent the Company on any issues arising.

Yours faithfully,

Arthur Cox & Co.,

16 November, 1984.