State to take control of IL&P after court move
Investors vow to fight on after judge overturns EGM motions
Published 27/07/2011 | 05:00
THE courts have cleared the way for the nationalisation of Irish Life & Permanent by force, after Department of Finance officials said Ireland's €85bn bailout deal could be jeopardised if the bancassurer didn't accept up to €4bn of public cash.
Documents lodged with the courts showed yesterday's order overturned almost all motions passed at Wednesday's EGM of IL&P investors.
Shareholders have already vowed to challenge the order, but the court was told they were trying to secure "unwarranted windfall gains, to which they have no entitlement whatsoever, at the expense of the Irish taxpayers".
Yesterday's decision means the State will take a 99.25pc stake in IL&P by Friday, after spending €2.3bn on ordinary shares priced some 10pc below market value and putting in €400m as a 'contingent convertible' loan.
IL&P is contributing €200m to its recapitalisation from its own funds, while another €1.1bn is expected to be raised through a debt buy-back and the sale of Irish Life Assurance.
The plc has committed to exiting the main Iseq listing and London's LSE "as soon as practicable" and will join AIB on the Enterprise Securities Market, where shareholders will be able to trade as normal.
The order also bans IL&P from appointing financial and legal advisers to review and report on alternative ways of raising capital and asking the authorities for an extension of the capital-raising deadline.
Both measures were proposed at last week's EGM and approved by more than 60pc of shareholders -- the Department of Finance's top banking official John Moran told the courts they should not go ahead "notwithstanding" that vote.
In his affidavit, Mr Moran said IL&P management had already held "over 50 meetings with investors", and had found a "lack of appetite or capacity for capital to be provided from private sources".
Mr Moran also stressed that there was "no possibility whatsoever" of the European authorities or the IMF granting "any further forbearance" on the deadline for recapitalisation.
Recapitalising IL&P is a condition of Ireland's €85bn bailout deal and the "external partners are entitled to discontinue their funding of the state" if the recapitalisation isn't carried out, Mr Moran added.
Yesterday's court order marked the first time a financial institution had contested an order made under the Credit Institutions Stabilisation Act, but the State's senior counsel told the court there were "no alternative means" for IL&P to raise the capital.
Mr Justice Brian McGovern said he was "happy" to grant the order, which was supported by both Central Bank governor Patrick Honohan and the National Treasury Management Agency.
A group of 150 dissident shareholders, led by Malta-based Scotchstone Capital, has already retained lawyers LKG to fight the order, and has up to five days to formally lodge an appeal.
In a statement issued last night, the group confirmed they would appeal the court order, saying Finance Minister Michael Noonan's position on IL&P had been "consistently grossly unreasonable" and that the Credit Institutions Stabilisation Act was "unconstitutional".
In a statement last night, IL&P noted the court order and confirmed it would comply with its terms.