EU gives green light to €875m EBS government rescue deal
Published 03/06/2010 | 05:00
EBS has received temporary approval from Brussels for its €875m emergency state recapitalisation, as the society continues to court private equity investment.
The Government pumped an initial €100m into the mutually-owned lender last week and is poised to commit up to a further €775m by way of promissory notes -- or IOUs -- in the coming months.
EU Competition Commissioner Joaquin Almunia said: "The measure is appropriate to preserve financial stability in Ireland."
The cash injection is needed to shore EBS's balance sheet up following the discounted sale of €1bn of loans to NAMA, and as all Irish lenders are forced to meet new regulatory capital levels by the end of the year.
However, EBS, headed by chief executive Fergus Murphy (above), hopes to shave up to €100m off the final amount as it seeks to buy back some of its riskier bonds at a discount in the market. The difference between the price it pays and how the bonds are valued as liabilities on its balance sheet can be booked as pure profit.
Mr Murphy said last week he expects the private equity consortium circling EBS, led by Dublin-based Cardinal Asset Management and understood to be backed by US buyout house JC Flowers, to come to a conclusion by the end of July.
Any outside investment would be used to claw back capital committed by the State.
The European Commission said yesterday its temporary nod for EBS's recapitalisation will last six months, as it probes the society's restructuring plan "to assess its difficulties in the long term and to become viable without continued state support".
EBS submitted its plan on Monday -- looking at various options, including a liquidation and gradual wind-down of the loss-making group. However, the central proposal centres around the establishment of a viable lender, controlled by the State or private equity.