Saturday 1 November 2014

Wilbur Ross backs new fund to lend to Irish builders

Published 12/06/2014 | 02:30

Wilbur Ross

Wilbur Ross has signed a new Irish investment deal with financiers Cardinal Capital Group.

Fresh from his successful Bank of Ireland sale, the US billionaire's firm has struck a joint venture agreement with Irish investment house Cardinal Capital that aims to raise €400m for property investments.

The new fund will be open to new investors as well as those who backed Wilbur Ross, pictured, previously on deals including his successful Bank of Ireland play. The fund-raising is expected to be finalised by September.

Once raised, the new fund will make so-called "mezzanine finance" investments in commercial and residential property schemes here.

Mezzanine finance is a relatively risky form of investment that bridges the gap between loans and pure equity – a mezzanine provider typical charges a higher interest rate than banks but unlike traditional lenders is well back in the queue to be repaid if a deal fails.

Cardinal Capital Group was set up by finance veterans Nick Corcoran and Nigel McDermott to invest in mainly financial assets. The firm was involved in putting together the €1.1bn 2011 deal when Wilbur Ross first invested in Bank of Ireland, and missed out in a bid to buy EBS, which was later nationalised and folded into AIB. It already operates a National Pension Reserve Fund-backed joint venture with US private equity giant Carlyle Group set up to invest in small and medium enterprises.

Mr Corcoran was a founder of Zurich Capital Markets (ZCM), one of the world's leading hedge fund asset managers, while Nigel McDermott was previously a director of International Investment & Underwriting (IIU) and stockbrokers NCB.

Meanwhile the Government will look for at least 30 cents a share when it sells its stake in Bank of Ireland to beat Wilbur Ross's average sale price of 29 cents, an analyst is predicting.

Merrion Capital's banking analyst Ciaran Callaghan said the political consideration of trying to match or better US investor Wilbur Ross is now likely to play a role in the timing and price of the State's exit strategy.

"We think that the minister (for finance) may target a share disposal price above the 30c level as its exit point. Politically the minister (and Government) would then be able to argue that the State generated a profit from its Bank of Ireland equity investment and also achieved a price broadly in line, or better, than the average exit price of Wilbur Ross (circa 29c)."

Finance Minister Michael Noonan has told the Dail that there is no immediate plan to sell the State's shareholding, which he said was valued at €1.2bn.

The Government stake is now valued at around 20pc less than it was in March, when Wilbur Ross began selling his stake.

Targeting a disposal price of 30 cents each would mean the Government waiting till the stock trades around 12pc higher than yesterday's 26.5 cents a share levels in Dublin.

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