Bank of Ireland Robs Galway Airport.

Sponge Bob

Where a company CONCURRENTLY has a deposit and a loan or overdraft with a Bank there are situations where if the loan is defaulted upon the Bank is allowed to "Offset" it against deposit funds even to the extent of clearing the loan or overdraft where funds permit.

However Bank of Ireland dipped into Galway Airports accounts last week and pilfered money to Offset against a Fully Compliant loan or overdraft facility.

The Airport Company is controlled and backstopped by none other than The Galway Chamber of Commerce who are in very good stead with all of the banks I would add.

The Chamber objected, the Bank refused to move and the Chamber issued this broadside against Bank of Irleand only this evening.

http://www.facebook.com/GalwayAdvertiser?sk=wall

The Galway Advertiser This is the situation this evening with GalwayAirport, a subsidiary company of Galway Chamber. Bank of Ireland has seized funds from the company’s deposit account thus jeopardising GalwayAirport’s ability to continue as a going concern.

On Thursday last GalwayAirport was trading as a going concern and had agreed a clear business plan for its future with its bankers.

It had €1.6 million in its bank account with further funds due. On Friday, without any notice to Galway Airport, Bank of Ireland seized €1.1 million from the company’s account and set it off against the company loans which were up to date, fully compliant and not in default in any way.

President of Galway Chamber Declan Dooley said this evening that this unprecedented move by Bank of Ireland could well have consequences should it be applied to any business in Galway.

‘This is an extremely worrying development, not only for GalwayAirport, but also for the member companies of Galway Chamber and for business as a whole. These actions imply that the bank can seize the cash reserves of any business to set off against compliant loans at a time when businesses are trying to survive in difficult trading conditions.

‘As President of Galway Chamber I am calling on Bank of Ireland to reverse this decision immediately and to return the money to GalwayAirport.

Further I call on Bank of Ireland and other banks to ensure that they will not raid company cash reserves to set off against compliant loans in this manner’, he concluded.

Now we actually have a bank regulator instead of an incontinent poodle who saw no wrong I would expect the Bank to be severely bitchslapped and fined heavily for this precipitate action.

3DataModem

Overdrafts are ALWAYS subject to immediate recall.

I'm guessing the bank knows more than we do. I would suspect that what may have happened is they have realised some of the collateral they hold for the airport's lines of credit isn't worth a damn, so they are reducing their exposure. Maybe they have land deeds or similar, worth a lot less than initially thought.

Assuming there is a good reason, we should be grateful that state owned banks are being proactive.

Sponge Bob

The Airport was backstopped by one of the largest Chambers of Commerce in Ireland ...not by Bernard McNamara or his ilk.

I assume the Chamber means "loans" where it uses the phrase in its statement and not Overdraft.

stackerman

MF Global anyone :rolleyes:

This sort of thing has been occurring before, and if you ask me, it's going to get worse.

Funny that there hasn't been a word in the main stream Media ! It's not like this is a small story, robbing, greedy, feckers !!!

screamer

You'd be surprised how many companies have been put out of business because of this practise, just going in, taking the money on deposit to offset the debt, company has no working capital- bang, game over, and I am talking about another prominent Irish Bank, not BOI.......

Sleepy

How is GalwayAirport a going conern?

They have zero scheduled commercial flights and have recently laid off most of their staff. The company must be absolutely hemorrhaging money and I would guess that any of their loans were based on their operating as an international airport rather than as an airfield for a few private jets and flying club Cessnas.

Sure, I'm making a lot of assumptions there but there's a lot more to this than the Chamber of Commerce press release the Advertiser seem to have published verbatim imho.

Sponge Bob

They have enough money to pay off the redundancy and shutdown costs as it is. Therefore they have an excess of funds over liabilities and can shut down.

As they can do so unlike the average Irish company which is seemingly a serial Examinership and Burn the creditor candidate at best, they are therefore a going concern.....especially considering where they are going.

dilallio

From http://www.galwaynews.ie/24047-airport-anger-bank-seizes-%E2%82%AC11m-its-deposit-account

The airport’s deposit account had €1.6m, and last Friday, the bank withdrew €1.1m, despite agreeing a business plan less than a month ago.
Of the remaining €500,000, around €450,000 is required for redundancy payments – last October 47 workers lost their jobs when Aer Arann cancelled its routes out of Galway.
That leaves just €50,000 in the coffers, which sources say will only see the airport stay open for “a couple of days or a week”.
Airport management were last night seeking legal advice on the matter.

Am I reading this correct?
Does this mean that the Airport hasn't paid redundancy yet to workers who were let go last Oct?

n97 mini

I would like to hear the BoI side of this as there are two sides to every story.

However, Galway Airport is effectively a zombie, and it looks like BoI decided to take their money back before someone decided to spend it on something else.

robd

As a business owner who also knows other owners and all dealings with a bank, this is unfortunately normal.

The banks have done their best to give businesses in Ireland ZERO credit. To get an overdraft or credit card etc. they look for a very wide lien over deposit accounts. This effectively allows them to offset all debts against the account.

They also look for personal guarantees for even small overdrafts and small credit card facilities.

Yes it looks like they saw the writing on the wall for this Galway Airport.

Possibly as a result of comments re airports from a certain Minister for Transport. The reality is Sligo, Galway, Kerry and Waterford are unsustainable as passenger airports. They put other airports such as Shannon, Cork and Knock in jeopardy. There licenses to operate commercial passenger traffic should be removed and PSO payments and routes suspended.

n97 mini

robd wrote: »

The banks have done their best to give businesses in Ireland ZERO credit.

In fairness to BoI if you hadn't made a red cent in 4 months, and were showing no signs of making money at all ever, I think I'd probably give you zero credit aswell.

If the airport was trading and actually had some revenue it'd be different.

Godge

Sponge Bob wrote: »

They have enough money to pay off the redundancy and shutdown costs as it is. Therefore they have an excess of funds over liabilities and can shut down.

As they can do so unlike the average Irish company which is seemingly a serial Examinership and Burn the creditor candidate at best, they are therefore a going concern.....especially considering where they are going.

How can they be a going concern when they have no commercial flights?

Dublin Airport is only 2:45 by bus from Galway, less by car - see bus timetable. Shannon Airport is even nearer.

http://www.citylink.ie/index.php/routes-a-timetables/timetables/22

Galway Airport has no future, was never anything other than a dream.

antoobrien

Godge wrote: »

How can they be a going concern when they have no commercial flights?

From wikipedia

The 'going concern' concept directs accountants to prepare financial statements on the assumption that the business is not about to go broke or be liquidated (i.e. where the business closes and sells all the assets for whatever price they can get).

From the O.P.

It had €1.6 million in its bank account with further funds due. On Friday, without any notice to Galway Airport, Bank of Ireland seized €1.1 million from the company’s account and set it off against the company loans which were up to date, fully compliant and not in default in any way.

The plan for Aer Aran is supposed to be to restart flights sometime in spring (April IIRC). If this is true then the airport can be considered a going concern.

Whether or not it is practical or feasible in your mind to run the airport is not particularly relevant tot eh accounting practice under discussion.

Sleepy

Aer Arran have no intention of continuing to run flights. I'm told by a cousin within the airline that AA were prepared to keep flying the route if GalwayAirport could move on landing charges etc. but it seems the board were happier to cut their nose off to spite their faces than to consider running the airport as a smaller, but still profitable, operation.

antoobrien

Sleepy wrote: »

Aer Arran have no intention of continuing to run flights.

We'll know wither way in a few weeks

Sleepy wrote: »

I'm told by a cousin within the airline that AA were prepared to keep flying the route if GalwayAirport could move on landing charges etc. but it seems the board were happier to cut their nose off to spite their faces than to consider running the airport as a smaller, but still profitable, operation.

Widely known in Galway that this is true. Interestingly three weeks after telling BOI they're looking for a buyer or investment, BOI go in take cash from their account.

President of Galway Chamber, Declan Dooley, told the Connacht Tribune last night: “Our reaction was one of absolute shock and outrage. It’s an unprecedented move by a bank. The airport has been repaying fully capital plus interest on loans to Bank of Ireland and Bank of Scotland (Ireland). The accounts, loans and tax affairs are 100% compliant.

“The airport engaged PricewaterhouseCoopers to find an investor or buyer. On January 4, Bank of Ireland were told of the plan and indicated they were in agreement. Three weeks later, they removed €1.1m.,” said Mr Dooley.

A statement from Galway Chamber reads: “On Thursday last, Galway Airport was trading as a going concern and had agreed a clear business plan for its future with its bankers. It had €1.6 million in its bank account with further funds due.

“On Friday, without any notice to Galway Airport, Bank of Ireland seized €1.1 million from the company’s account and set it off against the company loans which were up to date, fully compliant and not in default in any way.

Full article from the Connacht Tribune. available here

robd

n97 mini wrote: »

In fairness to BoI if you hadn't made a red cent in 4 months, and were showing no signs of making money at all ever, I think I'd probably give you zero credit aswell.

If the airport was trading and actually had some revenue it'd be different.

I don't disagree with you. I did state later in my post that the bank would have had a lien on the account (legally signed document) that allowed them to do with this.

This was merly my opening statement that banks are in general difficult to deal with at them moment and it's not just a Galway Airport thing.

Godge

antoobrien wrote: »

We'll know wither way in a few weeks



Widely known in Galway that this is true. Interestingly three weeks after telling BOI they're looking for a buyer or investment, BOI go in take cash from their account.



Full article from the Connacht Tribune. available here

From reading it, I can only assume that the bank reached the perfectly logical decision that nobody in their right mind was going to buy or invest in Galway Airport and moved to get what they are owed. Sounds fair enough to me, and as a taxpayer who owns part of the bank, I welcome them ensuring they get their money back.

antoobrien

Godge wrote: »

From reading it, I can only assume that the bank reached the perfectly logical decision that nobody in their right mind was going to buy or invest in Galway Airport and moved to get what they are owed. Sounds fair enough to me, and as a taxpayer who owns part of the bank, I welcome them ensuring they get their money back.

I hope you don't have a BOI account (I do and am seriously thinking of getting out after this) because it means that they can reach into your account to immediately balance any loans that are being paid on time for no good reason other than they feel like it

Godge

antoobrien wrote: »

I hope you don't have a BOI account (I do and am seriously thinking of getting out after this) because it means that they can reach into your account to immediately balance any loans that are being paid on time for no good reason other than they feel like it

I doubt that it was as simple as that - it would be illegal. The Galway Airport Board probably signed over the right to do so as some obscure clause of the loan deal. Not something that would affect ordinary punters.

stackerman

This is nothing new, Learn the lesson.

NEVER keep your savings with the same bank as your lender.

Separate accounts offer you NO protection, if with the same Bank.

antoobrien

Godge wrote: »

I doubt that it was as simple as that - it would be illegal. The Galway Airport Board probably signed over the right to do so as some obscure clause of the loan deal. Not something that would affect ordinary punters.

Seems like this is happening a fair bit. Statement made recently in the Seanad

Banks are turning business overdrafts into term loans in an “ugly practice” they are pretending are new lines of credit.

Speaking in the Seanad, Senator Higgins said while she welcomed Finance Minister Michael Noonan’s announcement in the Budget that he is setting a lending target of €3.5 billion for Bank of Ireland and AIB to the SMEs, she had become aware of an “ugly practice rearing its head” of recycling

“I have been made aware of an ugly practice rearing its head. In particular, I understand that customers of these banks are having their over-draft facilities withdrawn with unreasonable notice periods in many cases. The banks are putting the business-people of Ireland under duress in that they are forcing them to convert these overdraft facilities into term loans.

“What they are effectively doing is recycling loans and letting them masquerade as new lending

robd

Godge wrote: »

I doubt that it was as simple as that - it would be illegal. The Galway Airport Board probably signed over the right to do so as some obscure clause of the loan deal. Not something that would affect ordinary punters.

Yes, as I stated previously, banks usually look for something know as a "lien". This is a legal document whereby they secure loans/overdrafts against a deposit account. Usually it's a very broad document which favors the bank.

Better to have more than one bank and spread money accordingly.

n97 mini

antoobrien wrote: »

I hope you don't have a BOI account (I do and am seriously thinking of getting out after this) because it means that they can reach into your account to immediately balance any loans that are being paid on time for no good reason other than they feel like it

If you lost your job 4 or 5 months ago, had no dole, and had no prospect of getting another job, I'd say that gives them a moderately good reason to look for their money back.

I don't see what the big deal is. Galway Airport is a dead one way or the other.

antoobrien

n97 mini wrote: »

If you lost your job 4 or 5 months ago, had no dole, and had no prospect of getting another job, I'd say that gives them a moderately good reason to look for their money back.

I don't see what the big deal is. Galway Airport is a dead one way or the other.

The bank was getting its money, so they had no reason to take anything.

Whatever chance the airport had the bank just killed a business that was paying its bills. Is that something we want banks in this country to be able to do?

So you won't come crying if (or should that be when) they decide to do the same to your business.

Godge

antoobrien wrote: »

The bank was getting its money, so they had no reason to take anything.

Whatever chance the airport had the bank just killed a business that was paying its bills. Is that something we want banks in this country to be able to do?

So you won't come crying if (or should that be when) they decide to do the same to your business.

Yes, the bank was right. It saw a chance to get its money back from an unsustainable business that was never going to get investment or be sold so it took the right option of getting its money back. One less bad debt for us taxpayer owners of the banks to pay for.

Sponge Bob

The lesson, as Stackerman said above is don't put any of your savings in Bank of Ireland if you have a Mortgage or Loan with them because you never know when they feel the need to sweep accounts for cash.

antoobrien

This one gets better.

Apparently the AG has gotten involved now (good to have friends in high places for a change).

It turns out that the money that the bank took was

given to us by Government in OPEX (operation subvention) funding for 2011, so really, they have taken the taxpayers’ money.

What I don't get is that if the airport is unsustainable how can they not spend the OPEX money.

I presume that there's also a refund of a couple of months due to the governement (no flights just maintenance on the Aer Arann fleet since halloween), so that'll go down really well with Noonan.

n97 mini

So, if the govt looked for a pro-rata refund on the opex money (for the months it wasn't operating in 2011) and BoI called in its loan the airport wouldn't have enough money to cover both and would be immediately bankrupt.

From that article:

At the moment Galway Airport only has enough cash to stay open for just a matter of days, after the bank seized €1.1m from the deposit account last Friday.

From that it sounds like the airport was planning on staying open longer, but using borrowed money to do so.

antoobrien

n97 mini wrote: »

From that it sounds like the airport was planning on staying open longer, but using borrowed money to do so.

You don't seem to realise that without lines of credit most of the businesses around the world would be forced to shut down.

There's nothing unusual about a situation where a business would have a line of credit, especially if it was still offering services to it's customers - e.g maintenance facilities for Aer Arann (it's not clear if they will transfer it to Dublin yet).

Godge

antoobrien wrote: »

This one gets better.

Apparently the AG has gotten involved now (good to have friends in high places for a change).

It turns out that the money that the bank took was

What I don't get is that if the airport is unsustainable how can they not spend the OPEX money.

I presume that there's also a refund of a couple of months due to the governement (no flights just maintenance on the Aer Arann fleet since halloween), so that'll go down really well with Noonan.

Wouldn't like to be a Galway Airport director now.

No flights since October 31, no maintenance customers since December 31. Not enough money to cover outstanding loans or outstanding payments to staff. No prospect of any revenue to recover to cover those payments and loans. Potentially a case of reckless trading.

antoobrien

Godge wrote: »

no maintenance customers since December 31.

Aer Arann haven't announced (or rather I can't find a report saying) that they are leaving the airport, only that they are considering it.

Presumably they'll announce any decision when they announce their summer schedule.

The future of the airport isn't what's really bothering me about this one (the intentional mis reading of quotes to make a bad situation worse is the kind of innuendo we're used to in Galway), the directors are holding out for their payday that's the real problem.

No it's the fact that BOI have apparently decided arbitrarily to f*ck over a customer in good standing. After all if this is legal, what's to stop them to dipping into my current account or savings accounts to get the €100 odd quid of a credit card balance that I have left after giving them nearly over €1000 for the purchases I've made since Christmas.

If this one is let go, it will mean that any bank can potentially do the same.

Sponge Bob

Godge wrote: »

Wouldn't like to be a Galway Airport director now.

No flights since October 31, no maintenance customers since Dec Potentially a case of reckless trading.

That if provable..and i suspect it is not provable at all....
would be the only defence boi could make to the thieving they did last friday.

Nody

antoobrien wrote: »

No it's the fact that BOI have apparently decided arbitrarily to f*ck over a customer in good standing. After all if this is legal, what's to stop them to dipping into my current account or savings accounts to get the €100 odd quid of a credit card balance that I have left after giving them nearly over €1000 for the purchases I've made since Christmas.

If this one is let go, it will mean that any bank can potentially do the same.

The fact you did not sign a paper with terms saying you'll allow them to it.

Sleepy

Suggest the thread title be updated? BOI would only have done this if they hold a lien against the account. This would be a perfectly legal manoeuvre that in no way would constitute robbery.

GalwayAirport is dead in the water and tbh, if antoobrien is right that the only reason it's currently attempting to run as a going concern is for the benefit of the directors, I'd rather see BOI foreclose on their loans than allow them to firitter away their money since BOI is effectively state-owned.

robd

Sleepy wrote: »

Suggest the thread title be updated? BOI would only have done this if they hold a lien against the account. This would be a perfectly legal manoeuvre that in no way would constitute robbery.

Yep. I've said and explained that twice already in this thread.

I'm not sure certain others on this thread actually understand the concept and normality of a "lien" on a business deposit account.

dahamsta

It's lien. Sorry, was annoying me.

http://en.wikipedia.org/wiki/Lien

xflyer

Endgame now:http://www.rte.ie/news/2012/0206/galwayairport.html

Interesting to see how this goes. It cannot stay open now and there's no business, no revenue stream and no more Aer Arann flights.

Dannyboy83

robd wrote: »

The reality is Sligo, Galway, Kerry and Waterford are unsustainable as passenger airports. They put other airports such as Shannon, Cork and Knock in jeopardy. There licenses to operate commercial passenger traffic should be removed and PSO payments and routes suspended.

Not sure Cork is really sustainable either tbh.
I imagine it could be if the DAA was abolished, but the Subway chain up there went bust recently - makes one wonder if traffic was badly estimated?

Padraig Mor

Dannyboy83 wrote: »

Not sure Cork is really sustainable either tbh.
I imagine it could be if the DAA was abolished, but the Subway chain up there went bust recently - makes one wonder if traffic was badly estimated?

Cork airport is like a ghost town for the last year or two. Stroll in any day and the check in hall is nearly empty. Gangs of taxi drivers (neatly segregated into black and white) now wait in the arrivals hall to pounce on arriving passengers the moment they step out from the baggage hall. Book in advance and you can park in the short term car park for long term prices. The new terminal is a complete white elephant - the old terminal would be doing the job just fine now - and without a €160 million noose around the airport's neck.

Dannyboy83

Padraig Mor wrote: »

Cork airport is like a ghost town for the last year or two. Stroll in any day and the check in hall is nearly empty. Gangs of taxi drivers (neatly segregated into black and white) now wait in the arrivals hall to pounce on arriving passengers the moment they step out from the baggage hall. Book in advance and you can park in the short term car park for long term prices. The new terminal is a complete white elephant - the old terminal would be doing the job just fine now - and without a €160 million noose around the airport's neck.

O'Leary has said much the same in the past
http://archive.corkindependent.com/local-news/local-news/ryanair-boss-keeps-eyes-on-old-terminal/
and even said it's a catch 22 with the old terminal - it's just going to sit there rotting!