A LARGE amount of debt heaped on the Irish Greyhound Board because of the unravelling of its budget plans for its new stadium in Limerick has sounded alarms in its parent department.
Agriculture Minister Simon Coveney has been told the commercial semi-state is edging ever closer to its €25m borrowing limit.
The IGB has advised his officials its financial situation is “very difficult” and its taxpayer-supported surpluses are being used to pay down debt.
However, the IGB was only granted approval to borrow an additional €12m, and bring its overall bank debt to €25m, in late 2007. The facility was not agreed with AIB until Apr 2009.
This was done despite departmental reservations about the case put forward by the IGB when it asked to be let expose itself to more loans. There was also issues with its past record in this regard.
An internal memorandum to the secretary general of the Department of Sport (the board’s former parent department), prepared at the time the IGB made its application, said it was first granted permission to extend its borrowing limit to €12.7m in 2001.
This came with a commitment to have the loan paid off by 2005. But the memo said this did not occur and the debt stood.
In 2006 a preliminary examination of the request doubted the IGB’s capacity to properly plan its budgets for the projects which the loan was intended to support.
“The main concern was that the investment projections and borrowing requirements submitted by Bord na gCon varied significantly over time, giving rise to doubts about the reliability of the forecasts and whether a borrowing limit of €25m was in fact sufficient.
“The department was also concerned that despite the high levels of investment in greyhound tracks in previous years, Bord na gCon’s operating loss had not improved,” it said.
An accountant then looked over the revised proposal and satisfied himself that the plans developed by the IGB justified the additional debt.
However, when it came to the Department of Finance, further worry was expressed at the fact its case for additional loans was premised on the continued funding of the group by taxpayers through the Horse and Greyhound Fund.
“The department is also conscious that the plan assumes a continuing heavy reliance on receipts from the Horse and Greyhound Fund notwithstanding the fact that [it is likely to be reviewed],” the Department of Finance’s approval letter said.
The department also put in a caveat — that any additional borrowing would not be State guaranteed and if the IGB ran into bother it would have to sell assets. The IGB’s share of the Horse and Greyhound Fund has been reduced from €15m to €11m a year and this has put enormous pressure on the organisation to cut wage costs and reduce prize money.
More recently, at a liaison meeting between the IGB and officials at the Department of Agriculture, the company lobbied for more certainty surrounding its funding.
It had already been warned, by the Departments of Finance and Sport, that it could not rely on this income stream and if it could not meet repayments tracks would have to be sold.
“Responsibility for servicing the borrowings rests solely with Bord na gCon and that in the event difficulty in meeting the repayment schedule might arise, recourse must be had to the Bord’s own assets and not the Exchequer,” separate letters said.
The IGB subsequently mortgaged three more of its tracks to satisfy the collateral requirements of AIB. However, the potential value of this collateral is questionable.
At a meeting last year the Department of Agriculture suggested selling uneconomic tracks but it was told this was not an option because, among other reasons, there were few alternative uses for greyhound tracks.
The debt situation has come into focus following the unexpected costs associated with its new €23m stadium in Limerick and its inability to get more than €8m for three sites in the city it was vacating.
But at the outset, the civil servants were not the only people concerned about the borrowing.
Minutes of an IGB board meeting, held immediately prior to its initial loan application, show views within in the organisation were divided on whether the request was feasible.
The then chairman Paschal Taggart told the board he was a cynic regarding the borrowing application and did not feel the IGB would get approval.
Until the IGB’s annual accounts are published, there is no clarity on its debt position at the moment. In March, the IGB said, in a statement to the Irish Examiner, that its overall debt position was below €19m.
However, four months earlier the department’s internal notes said it was likely to hit €25m by the end of 2011 and had already reached €23.8m.
The IGB was asked last Wednesday for a statement on this fluctuation and for an update on its latest figures, as they have been presented in its annual accounts.
But the IGB said it had not been given enough time to respond.
“To this end Bord na gCon have not been afforded the necessary time to answer these lengthy questions and are extremely disappointed that the Irish Examiner will not afford us the courtesy or journalistic fairness to answer these queries,” it said.
It did say it was paying all its creditors on time.
“Bord na gCon wish to confirm that all invoices are paid as they fall under their obligations under the Prompt Payment Act,” it said.
The IGB was also asked for clarity on its 2011 results. In October, it told the department it would make a €300,000 loss after writing down the value of its old track in Limerick and paying €1.5m to Dundalk track, which it owed after a legal dispute.
The IGB said its operating surplus was €3.15m but this was written down by debt repayments plus more than €2m in capital spending.
To get the loan facility from AIB in 2009, the IGB allowed six of its other tracks to be mortgaged, three were nominated from its earlier loan.
In its application to the Department of Sport the IGB chairman Dick O’Sullivan said the loan facility would see it develop projects at Limerick, Kilkenny, Clonmel and Enniscorthy.
However, the recent department records note that almost the entire loan has been exhausted on the new stadium in Limerick.
The IGB has already had to restructure a development charge debt to Limerick City Council after twice failing to settle it.