EBS suitors to seek state indemnity in EU aid probe
Published 12/10/2010 | 05:00
THE Government will be asked to fully indemnify EBS's bidders against any adverse effects stemming from the European Commission's state aid probe into the building society.
The news comes after Brussels yesterday announced plans for a six-week investigation into the €875m state cash package for EBS which effectively nationalised the building society.
The Government has already put EBS on the block, with a group of four bidders expected to be whittled down to Irish Life & Permanent and one private equity vehicle by the end of the week.
The Irish Independent understands that while the sales process can proceed alongside the investigation, placing EBS in private hands does not eliminate the state aid issues.
"Generally, when a company receives aid and is then privatised, there can still be recovery of that state aid," said one Brussels source, while declining to comment on EBS specifically.
Department of Finance sources last night said it did not expect the probe to have "any impact on the EBS sales process", adding that final bidders were expected to be selected "in the coming days".
Sources close to the bidders, however, said would-be buyers would now insist on an "indemnity" or "letter of comfort" in the event of any adverse findings from the European Commission investigation.
"Everybody's lawyers would insist on that, it wouldn't be just us," said one source.
A spokeswoman for the Department of Finance declined to be drawn on whether the Government would agree to give such an indemnity.
"The impact of any sale of EBS is subject to Commission approval as part of their assessment of the restructuring plan," she said.
"As the sale process is still ongoing, the department can not comment about specific aspects of the various bids. The structure of bids vary and all bids are currently still subject to discussion and negotiation."
Announcing the probe, EC competition boss Joaquin Almunia pointed out that the amount of aid received by EBS "justifies that we give interested third parties the opportunity to comment on whether the distortions of competition are adequately addressed".
Mr Almunia also noted that, having considered EBS's May restructuring plan, "the commission has concerns whether the distortions of competition caused by the aid to EBS are sufficiently addressed".
The probe is expected to last six weeks, a relatively short time in EC terms.
The Department of Finance said completion of the investigation will "help bring certainty" to EBS's restructuring plan, which was submitted in May.
The EBS's four bidders are Irish Life & Permanent, US investment specialist JC Flowers, British private equity vehicle Doughty Hanson and a consortium that includes Cardinal Asset Management, the Carlyle Group and American investor Wilbur Ross.
The field is expected to be narrowed to two by the end of the week, with newswire Bloomberg yesterday reporting that IL&P would be among the final contenders.
The bancassurer hopes to merge EBS's mortgage and savings business with its Permanent TSB bank. Other players are also keen to use EBS as the starting point for a larger banking group, with the Cardinal consortium setting aside another €3bn for Irish acquisitions.