CIÉ has negotiated a new €160 million debt facility from a consortium of four banks which it says should prevent the need for further Government bailouts of the cash-starved State transport company.
The loan arrangement – which The Irish Times understands was obtained from Barclays, Bank of Ireland, AIB and Ulster Bank – has stringent covenants attached, including limits on the company's ratio of debt to earnings, and its interest cover.
Grow revenues
The deal requires CIÉ to grow its revenues, which fell last year by €64 million to €725 million, and also to hit earnings targets and further cut costs, particularly labour costs. If the company fails to hit its targets, the level of funding available to it under the facility will shrink.
Vivienne Jupp, chairwoman of CIÉ, yesterday told an Oireachtas transport committee that if CIÉ fails to hit its targets, it will return to the "crisis situation" it faced last year when it required an extra government bailout of €36 million, on top of a planned subvention of €235 million.
“Effectively, the banks are our troika, and therefore we must avoid such a scenario,” she said. The company had exhausted its previous bank facility of about €121 million, and according to the Government, had “lost the confidence of its banks”.
CIÉ, which operates Dublin Bus, Irish Rail, Bus Éireann and CIÉ Tours International, would have run a €45 million deficit last year only for the emergency government bailout and a further €20 million it received by offloading land parcels in Dublin's Spencer Dock.
Cut costs
Minister for Transport Leo Varadkar has repeatedly said that the provision of emergency funding to CIÉ last year was a one-off, and that it had to cut costs to secure its own future.
Ms Jupp told the committee that pay and productivity deals had been negotiated or were being balloted upon by its various operating units. She declined to talk about the detail of the deals. “We are also in the process of reviewing the strategies for all three companies and the group to meet the challenges ahead,” she said.
A spokesman for Mr Varadkar said last night: “More debt is not the solution to CIÉ’s financial problems but it does buy it the necessary time to reduce costs further, and increase passenger numbers and revenue in order to generate the surpluses needed.”
