Financial chiefs in favour of credit line

Corporate Ireland’s financial heads are overwhelmingly in favour of the Government agreeing a back-up credit line upon exiting the country’s bailout programme in December.

A full 100% of chief financial officers of the country’s largest companies said in a survey that they feel there is a need for the Government to seek a precautionary credit line from the European Stability Mechanism once the bailout programme runs its course on Dec 15.

The latest edition of the quarterly Deloitte CFO survey also found that 52% of finance directors feel the end of the bailout will have a positive effect on their business. While only 4% feel it will have a negative effect, as many as 44% say they have no strong opinion on the matter.

Finance Minister Michael Noonan this week suggested that, with Ireland fully funded up to 2015, leaving the bailout without a supporting credit line would not necessarily be a big risk.

“Perhaps on the basis that it is better to be safe than sorry, CFOs are unequivocal in their belief that the Government should seek access to precautionary credit funding once we exit the bailout in December,” reported Deloitte partner Shane Mohan.

“CFOs have spent the last five or six years focusing on how they fund their business, so it is no real surprise that they would adopt such an attitude to how the State funds itself. As the country nears exit from the bailout programme, there is a general improvement in confidence among our finance officers.

“The unwinding of the EU crisis, or at least the perception of its unwinding, is having a reassuring impact on sentiment among CFOs and boosting their confidence levels towards both their own businesses and the wider Irish economy.”

The overall improvement in performance is helping companies to deleverage, with one in four businesses reporting a reduction in their net debt levels — 24% of respondents reported that their gearing levels had fallen over the last 12 months, an improvement from a net 13% from the same time last year.

The trend towards availing of credit from domestic banks continued in the quarter, with 54% citing it as the preferred source of credit, up from 50% in the second quarter of last year and from 46% in the final quarter of 2012.

Half of the CFOs, however, believe that the cost of new credit will be high.