Cardinal group offers State profit-sharing deal on EBS
Published 16/11/2010 | 05:00
THE private equity consortium fighting it out for ownership of EBS is offering the Government a profit-sharing deal so the State can enjoy some upside from the embattled building society's recovery.
Sources close to the Cardinal Capital-led consortium last night confirmed that the group was also "open to" allowing the State to keep a stake in EBS, mirroring an offer made by Irish Life & Permanent (IL&P).
The Cardinal grouping, which also includes famed US investor Wilbur Ross and US private equity house Carlyle, and IL&P are the last remaining bidders for EBS and have been given until December 22 to lodge final bids.
The National Treasury Management Agency (Ntma) is understood to have held numerous meetings with both groups in recent weeks to tease out the finer points of their bids, while due diligence by both bidders is ongoing.
Meetings with the European Commission, which is examining the €350m in state aid already given to EBS, have been scheduled for late November.
"There's no question that the Government is selling too cheap," a source close to Dublin-based Cardinal said yesterday, pointing out that the State was now on the hook for providing EBS with another €525m of capital by the end of the year.
The Cardinal bid sees the new consortium pick up that tab, and also repay the €350m the Government has already ploughed in once the building society becomes sufficiently profitable.
"There's an element of profit sharing as well," a source confirmed yesterday, "once we see clear blue sky, everyone gets a piece of that."
The detail of Cardinal's plan is understood to include no job cuts, since the consortium wants to use EBS as a building block to create a larger Irish institution.
Cardinal has already contacted the Ntma about buying the deposit book of Irish Nationwide, sources confirmed, while other Irish assets are also being assessed.
While Cardinal is promoting its bid as a way to bring foreign capital into the market, the consortium's offer is best-known for its commentary around debt forgiveness for mortgage-holders.
Sources yesterday said that those original comments by Mr Ross had been overplayed, pointing to a weekend interview from the American which stressed that any debt forgiveness would be limited and on a case-by-case basis.
"Debt forgiveness is not a major plank of the offer," one source insisted.
Cardinal's initial offer for EBS was lodged before the sovereign debt crisis which has locked Ireland's institutions out of the funding market and raised the spectre of an international bailout.
Sources yesterday said that all of Cardinal's backers remained fully committed despite the changing circumstances.
Cardinal believes a "system-wide" solution to the funding crisis is needed but thinks EBS will be in better shape than the other institutions if it has the firepower of investors like Mr Ross on its board.
Cardinal would also have no hesitation in going ahead with its bid in the event that Ireland is forced to accept a bailout, since such a bailout could be seen as "solving" some of the current market issues.
Sources close to the consortium also confirmed that Cardinal has no plans to change any of EBS's executive team. "For an institution of its size, the depth of experience there is impressive," said one source.