Wednesday 29 March 2017

Guru Watsa shows faith in BoI and Boucher, but quiet on value of deal

INTERVIEW

Laura Noonan

Laura Noonan

A FEW weeks back, Prem Watsa's strongest connection to Ireland was serving as best man at a friend's wedding in Co Kildare a decade ago.

Now he finds himself cast into the national spotlight as one of the chief architects of a deal that saved Ireland's banking sector the ignominious fate of complete nationalisation.

The Indian-born investment guru doesn't want to lunge straight into why he sees value in an Irish banking sector, preferring to kick off "at the beginning".

The "beginning" was a call from William McMorrow.

Mr McMorrow is the top man at US-based Kennedy Wilson, best known in these quarters for waxing lyrical about Ireland's prospects after he snapped up BoI's real estate management arm a few months back.

Still enamoured with the Irish story, Mr McMorrow told Mr Watsa he'd been "very impressed" with BoI's management team and suggested that Fairfax could do worse than have a look at BoI.

Mr Watsa had done business with billionaire investor Wilbur Ross before, Mr Ross also had been positive enough on Ireland to bid for EBS, so he was a natural addition to Project BoI.

Mr McMorrow, Mr Watsa and Mr Ross then got to thinking about other "long-term value orientated investors", eventually leading to fellow US firms Fidelity and Capital coming on board.

Two weeks ago, the would-be investors came to Ireland to meet with BoI boss Richie Boucher, officials from the Department of Finance and the top brass at the Central Bank.

The usual due-diligence process was ploughed through, but for Mr Watsa the clincher was BoI's chief executive.

"We would not have done this deal if not for Richie Boucher," he says with feeling, also paying tribute to the "wonderful management team" around the South African.

To the home audience, Mr Boucher's future at BoI looks uncertain at best.

The Finance Minister has pledged to remove pre-bailout bank bosses and the Central Bank has vowed remove by January 1 anyone who was found to have "contributed" to their bank's demise.

Did the authorities give Mr Watsa assurances on Mr Boucher's longevity to grease the wheels of this week's deal? "The department worked tirelessly to get the deal done," Mr Watsa replied. "They gave no guarantees," he later admits, "but we clearly said that that was the reason for our investment."

Having grown Fairfax from a $10m start-up 25 years ago to an insurance giant with $8bn (€5.5bn) of capital and an investment portfolio of $24bn, Mr Watsa obviously has a knack for picking a good horse.

While most investors this side of the Atlantic would be quick to insist they hadn't secured assets from the Irish government at a "firesale" price, Mr Watsa gives the question some consideration.

"We looked at the long-term future of the bank, we think it's appropriately capitalised to deal with the stress tests scenarios . . . We see real value here."

Assessment

That "real value" assessment stems from Mr Watsa's glowing assessment of Boucher & co and his upbeat assessment of the Irish economy.

"The bank has an excellent disciplined credit culture," he says. "[It got into difficulty because] in a property and construction tsunami, no bank is spared."

That faith in BoI isn't going to tempt Mr Watsa to edge Fairfax's stake beyond the "about 9pc" he's taking as part of this deal, but he's actively exploring other Irish investments.

Mr Watsa may soon get time to mull over other Irish investments up close -- the Government and BoI "generously" told the new investors they could appoint someone to BoI's board, and Mr Watsa isn't ruling out stepping up to the mantel.

Either BoI is the deal of the century, or it must have been some wedding.

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