State set to write off €46m debt

THE Government is set to write off a bad debt of almost €46 million from a loan issued to a defunct mining company in the mid-1980s.

However the State is pursuing €4.5m in legal costs from certain directors of the company, Bula Ltd, arising out of a series of failed court actions, where damages of €464m were being sought.

The original loans totalling just €1.2m to Bula Ltd were used to cover money owed to three banks, but interest is still accruing on the loans, granted between 1983 and 1986, and the interest now stands at €44.43m, making the total debt €45.6m.

Despite being a 49% shareholder in the company, the Government received no repayment on the loan or the interest when the company's assets were sold on to Tara Mines Ltd for €35m years after Bula Ltd went into receivership.

Bula Ltd still exists, but has no known assets and is not trading, meaning the State has no chance of getting its money back.

Yet the debt still continues to appear on the accounts of the Department of Communications, Marine and Natural Resources, with the interest growing on an annual basis and the Green Party says questions still remain to be answered on the affair.

According to a memo from the Department to the Dáil Public Accounts

Committee, interest on the loans is calculated at a 20% rate per annum and as at December 31, 2003, it stood at €44.43m.

Department sources concede the intention is to wipe the debt off the books as it is not realistic to expect repayment.

But Green Party finance spokesman Dan Boyle says the taxpayer deserves an explanation about how the State ended up with no protection whatsoever and no payback.

"What attempts were made to ensure repayment of even the original loan?

"What efforts were made to convert it from a compound interest loan to a debenture as that would have made the State the preferred creditor? The original loan was paid to cover the interest due to the banks but then the State became the creditor of last resort," he said.

"The company has been put into receivership and it doesn't seem like it will be repaid.

"With the interest added, it is a fair sum of money and a decision has to be made on it," the Cork South-Central TD said.

The memo from the department goes into detail on the lengthy court battles, involving the company set up in 1971 for mining at Nevinstown, near Navan in Co Meath.

The Chief State Solicitor is pursuing Bula Ltd directors, Michael Wymes and Richard Wood, and Bula Holdings Ltd, for €4.5m in outstanding costs, while almost €1.2m has already been paid over by plaintiffs in cases against the State, Tara Mines and others.