Ireland’s largest firms displaying unexpected ‘resilience’ in COVID-19 crisis so far- says ISIF chief in UCD Podcast
Over 30 of Ireland’s medium and largest businesses are in ‘ongoing’ engagement with the Government’s new pandemic stabilisation fund, but so far the country’s largest businesses have proven unexpectedly resilient, the head of Ireland’s sovereign wealth fund has said.
Speaking in the UCD Business Impact podcast, Eugene O’Callaghan, head of the Ireland Strategy Investment Fund (ISIF), said he had been surprised by how resilient Ireland’s medium and large business segment had been. The firms in question either must have €50m in turnover or over 250 employees.
“There has been much less emergency room-type situations than we might have expected,” said O’Callaghan to UCD Quinn School lecturer and host of the UCD Business Impact podcast, Emmet Oliver.
“I had envisaged, having seen economic activity fall off a cliff in March and April, that businesses would be needing money to meet the next payroll and so on. But certainly in the medium to large enterprises sector, which is probably quite different from the smaller businesses sector, these businesses have strength and resilience and are looking much further out than I might have initially expected,’’ said O’Callaghan, who is also a UCD BComm alumnus.
“We are engaging with quite a lot of these companies at the moment. We have over 30 significant engagements ongoing, but I think the point is that they’re not needing a resolution by next week. I would expect that the capital raising of the bulk of these businesses will take place over the coming months, as opposed to the much shorter term,'' O’Callaghan continued.
However he warned that the situation was subject to change and later this year, the ISIF might be needed to make a bigger contribution to nursing firms through the crisis.
“We think there is a significant possibility of the volumes that we might be seeing, increasing in quarter three after government supports, which have been really helpful for employees if they get unwound or eliminated.
“Banks have offered a lot of forbearance and support which I think is probably for a six-month period, but after September banks may need to take a stronger view. They may be required by regulatory pressures to take stronger views, landlords have been offering forbearance as well.”
“Even though demand has been crushed, the combination of government supports for staff, bank forbearance and some landlord forbearance has meant that businesses have been able to keep going much better than expected through this period. When they begin to fall away probably later in the year, if customer demand hasn’t recovered, we want to be ready for a big uptick in in-bounds at that point, which we see as a possibility. It’s far from a certainty, but definitely a possibility.’’
Asked how firms were engaging with the ISIF pandemic fund, he said:
“They’re thinking about; Can we solidify our capital base? Can we raise more capital to build in more resilience? They’re not clear at this point as to the path of recovery, or what the pace of recovery is going to be. Some of them may be questioning if they’ll definitely need capital later in the year (2020). Some of them are talking to us on the basis of raising capital, but hoping not to need it, if the recovery path is pretty fast. These are generally well managed businesses obviously to get to be medium or large and they have more resilience to what’s been a dreadful hit on customer demand than I might have initially expected’’.
“The sectors in the most trouble were travel, retail, hospitality and anything to do with people moving around,’’ said O’Callaghan.
He said the fund would not bail out nonviable businesses.
“There are one or two businesses we have engaged with, that have never really been viable and so that’s not something our mandate would encourage or enable us to invest in.’’
The full interview is available at: https://www.smurfitschool.ie/podcast/ and is part of a weekly series of business related podcasts featuring thought leaders from the world of academia and industry discussing the most compelling issues affecting our lives from a business perspective.