Thursday 8 December 2016

EBS gets more time to raise €438m in capital as sale looms

State puts €525m into building society for Central Bank targets

Published 16/12/2010 | 05:00

STATE-owned EBS is being given an extra two months to raise its final €438m in capital in the hopes that the building society will be sold by then and that the new buyer will contribute to the bill.

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The news comes after the Government this week put €525m of state cash into EBS to enable the society to meet the Central Bank's end-of-year capital targets.

The moves change the playing field once more for EBS bidders, who are also mulling over a new five-year plan circulated last week which includes an accelerated schedule of loan loss provisions.

One of EBS's would-be buyers, a consortium led by Dublin-based Cardinal Capital, had originally offered to put in the €525m themselves. That plan was overtaken by delays in the EBS sale process.

Final bids are now not due until January 17 -- so the €525m demand falls due before EBS changes hands, prompting yesterday's injection by the State which had already stumped up €350m.

A demand for a further €438m, introduced by the Central Bank in late November, was originally also due to be fulfilled by the end of December.

But the deadline for raising that extra money has now been pushed out until the end of February, bringing EBS into line with the other Irish banks that have to raise extra capital in the same timeframe.

Crucially, the longer deadline means that EBS is likely to change hands before the extra capital is needed, so the Irish Government won't necessarily be on the hook for the entire amount.

The Cardinal consortium, whose members include US investment giant Wilbur Ross and the Carlyle Group, is understood to be prepared to pay at least some of the extra €438m.

The Government will also be asked to contribute, in exchange for a stake in EBS or a share of future earnings.

Bidders

The position of the other bidder, Irish Life & Permanent (IL&P), is unclear but the plc's outgoing chairwoman Gillian Bowler last night confirmed IL&P was "absolutely" still competing to buy the building society.

The capital manoeuvres came just days after EBS management circulated a new five-year plan to bidder groups.

The plan is understood to include higher levels of imminent loan losses on the building society's residential and commercial loan books, making 2010 and 2011's results look worse.

The building society's management is also intensively engaging with prospective buyers.

A key player in the Cardinal consortium, WL Ross vice-chairman Jim Lockhart, is expected to meet executives in Dublin tomorrow.

A spokesman for EBS said he couldn't comment on any engagement with prospective buyers.

In a statement, EBS said it wished to "acknowledge the continued support of the minister and the assistance of the Central Bank", adding that the society was "extremely grateful" to the Government for the recapitalisation.

Irish Independent

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