We’ll pay through the nose to bail out our creditors and save the euro

WHAT’S happening to Ireland at present reminds me of a true, but ugly, story of the near collapse of an Irish corporate icon nearly 20 years ago.

In 1992, GPA was regarded as one of Ireland’s greatest corporate success stories. Entrepreneur Tony Ryan had built a company that was the world’s biggest in its area of expertise, purchasing passenger aircraft which it then leased to airlines throughout the world. Essentially, what GPA did was borrow the money to buy the aircraft and then made its profits by renting them to airlines at what was a higher price over the lifetime of the aircraft.

It was a financial institution, a type of specialist bank for the airline industry. And in 1992 it ran out of cash, just as a global recession depressed passenger aviation. GPA had ordered too many aircraft and did not have the money to pay for them, although this did not become clear until information had to be provided to the stock market as part of a plan to raise new money by issuing shares publicly. It had hoped to raise new money by selling new shares (while at the same time raising money for original investors by selling some of the original shares) which would then allow it borrow a multiple of that again to pay for the planes it had on order.