Thursday 19 October 2017

Consultants to get €250m windfall in latest banks' recapitalisation

Banking

Laura Noonan

Laura Noonan

CONSULTANTS, advisers and lawyers look set to reap a windfall of more than €250m from the latest recapitalisation of Ireland's embattled banking sector.

Banks have engaged global financial powerhouses, including Deutsche Bank, Credit Suisse and UBS, to help with the €24bn capital raise, along with teams of lawyers.

The State is also footing a €30m bill for BlackRock and Boston Consulting, who worked on the stress tests that shaped the bailout, while the taxpayer will be paying for Goldman Sachs to examine the banks' plans.

Bank of Ireland has publicly said that it expects to incur costs of about €150m from its €5.35bn capital-raising exercise -- even though a lot of the capital is set to come from the State.

Advisers on the BOI ticket include Deutsche Bank, UBS and Credit Suisse and local players IBI and Davy.

The fees also include significant legal costs, largely associated with a €2.6bn bondholder deal.

AIB has refused to disclose the estimated costs of its €13.3bn July recapitalisation -- despite the fact that the fees will effectively be paid by taxpayers who own 93.5pc of the embattled bank.

Market sources said that AIB's fees were likely to be significantly lower than BOI's, even though AIB's capital target is considerably higher.

BOI is proposing to raise its €5.35bn by issuing new shares, doing a deal with subordinate bondholders and getting support from the State to make up any shortfall. AIB's plan involves doing a deal with bondholders and issuing new shares to the State, but the bank is not pursuing fresh private investment and so won't incur hefty fees.

Irish Life & Permanent, which will be all but nationalised when it takes €2.7bn in state investment, also refused to say how much it would be spending on fees as part of its capital raise.

IL&P's plan involves doing a deal with subordinated bondholders, selling off its life insurance business through a trade sale or flotation and taking money from the State.

A stock market flotation of Irish Life Assurance could cost about €40m, market sources said, adding that a trade sale would be significantly cheaper.

The deal with subordinated bondholders will also involve legal costs and fees to investment banks.

Conservative estimates put the professional fees across all three banks at well over €200m.

The recapitalisation will also trigger significant fees from Goldman Sachs, which is assessing the plans for all the institutions on behalf of the National Treasury Management Agency.

Irish Independent

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