Saturday 27 August 2016

Wilbur's back for more after cleaning up at BoI

Shane Ross

Published 15/06/2014 | 02:30

Money Man: Wilbur Ross took the State to the cleaners with his BoI windfall. Now he’s eyeing up Irish property. Photo: Simon Dawson/Bloomberg
Money Man: Wilbur Ross took the State to the cleaners with his BoI windfall. Now he’s eyeing up Irish property. Photo: Simon Dawson/Bloomberg

AND we thought we had seen the last of Wilbur. No such luck. Wilbur Ross has twice taken us for a ride recently. Indeed, he has become very partial to us.

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Imagine the yarns he spins to his rich pals back in South Carolina about Ireland – the land of suckers and easy pickings.

Wilbur is far from gone. He may have left the board of the Bank of Ireland and dumped his shares, but he is still among us.

Last week, after trashing the price of Bank of Ireland shares for a second time, Wilbur returned to the land that keeps on giving. No sooner had he sold all his B of I stock to an unsuspecting market than he was back for more. This time the old bottom fisher is sniffing around in the bombed-out Irish property market. Are we about to be bitten by Wilbur for a third time?

Wilbur has teamed up with financiers Cardinal Capital to buy Irish property. He will be using part of the €477m profit from his Bank of Ireland smash-and-grab raid to fund his latest adventure. Ireland is the loser.

Three years ago Wilbur, the visiting US vulture, was portrayed as some sort of national saviour. Had he not kept the Bank of Ireland out of public ownership by buying heavily into its shares at 10c? Was he not bailing Michael Noonan out of a hole by providing funds that the State might otherwise have been forced to find? Okay, Wilbur was having a mother of all punts, but he was a gentle, grandfatherly figure. Surely the then 74-year-old was not after a quick buck, still less exploiting a nation on its knees? He was greeted with gratitude.

The grandfather did not loiter for long. In March this year he began to bail out of his investment. Sensibly enough, he decided to cash a third of his B of I chips at a vast profit. A few eyebrows were raised, but charitable souls forgave him. Wilbur had rescued us in our hour of need. Fortune had favoured the brave.

Wilbur's March sale of just one third of his holding gave him back his entire original stake. His remaining investment represented pure profit. He had trebled his money. Far more startling was Wilbur's reassurance to The Irish Times's Ciaran Hancock that he had no "intention" of selling his remaining stake.

Ahem. His March assertion now looks a bit like a porkie. Those who bought Wilbur's shares in March have reason to feel a bit sore.

Some innocent sinners, shareholders in Bank of Ireland, believed Wilbur. They held on. He further softened the blow by simultaneously muttering soothing noises about his admiration for controversial B of I boss Richie Boucher and his confidence in Ireland. The more cynical among us pointed out that Wilbur was only locked into his remaining mountain of shares for a mere 90 days; that the clock was ticking; that Wilbur was really a seller; that he needed to reassure the market so that the price did not come tumbling down in anticipation of a further massive sale from him.

He could even have ruined the market on himself. In this column I wrote: "As a small investor I would not want to be hanging around after May 24."

Wilbur's wheeze worked. The share price drifted slowly downwards after his first sale at 32.8c, but it held levels that compared favourably with other financial shares. Wilbur's remaining holding still stood a country mile above his entry price of 10c. Last week he disposed of the lot at 26.5c. The instant the lock-in period was over, he took the opportunity to flee.

So much for his confidence in the bank's future.

Wilbur offered utterly unconvincing excuses for the sale. First, he insisted that he was overinvested in banks. Possibly true, but no vulture fund is too sensitive to portfolio diversification. His second excuse was a beauty: he was limited by European rules in the number of bank boards he could adorn.

Does he think we are morons? If he retained such confidence in the B of I why did he not resign as a director and retain the investment? Hopefully this was not a second porkie.

Perhaps he is embarrassed by his success. Shares in Bank of Ireland stood at 39c on March 2. Since Wilbur started his manoeuvres they have fallen to Friday's price of 0.265. His antics have helped to sink them by over 30pc.

Wilbur is the big winner. He is shot of Bank of Ireland shares before the Pan European stress tests threaten to shatter Irish banks in the autumn. Michael Noonan is the big loser. The guardian of the Irish taxpayer's 14pc Bank of Ireland shareholding is a beached whale.

Did Noonan believe Wilbur's nonsense in March about his continued confidence in Boucher, the B of I and Ireland's economy? Instead, Wilbur voted with his feet last week, exiting the symbol of Ireland's economic recovery like greased lightning. He left Noonan flat-footed.

The Minister for Finance had every opportunity to sell the State's stake after the results when the shares stood at 39c. He could have read the signs when Wilbur sold in March. He could have taken advantage of Wilbur's 90-day lock-in window – to sell your stock and mine at above 30c while the vulture from Carolina stood helplessly stranded on the sidelines.

But he didn't. He is now left with the largest shareholding in the bank, overhanging the market, bearing an embarrassing 'For Sale' notice.

He is exposed, outwitted and deserted. The Government's stake has already lost 20pc of its value since Wilbur's sale in March. At least Michael must have thought he had seen the last of Wilbur. Not at all. Granpa is back to haunt us.

While it was announced on Monday that he was abandoning the Bank of Ireland with a vast profit, two days later it was revealed that he had decided that depressed Irish property was his next victim.

He is switching some of the profits from his Bank of Ireland snatch into Irish bricks and mortar in a joint venture with high-fliers Cardinal Capital. Together they will be providing "mezzanine finance" for a new property fund.

Mezzanine finance is not for widows and orphans. It is high-risk, specialist lending for speculators and get-rich-quick merchants. It bridges the gap between loans and pure equity.

Granpa has left the Irish banking battlefield in a shambles. The sharp drop in Bank of Ireland shares – accelerated by his exit – is mirrored in the doldrums suffered by the 98pc State-owned AIB shares.

On Friday they were still struggling to keep out of single figures, hovering above the 10c mark, their low point for the year. Next Thursday, AIB faces a stormy AGM as taxpayers and shareholders voice their fears about the future of Irish banking, the dangers of the oncoming stress tests and the sudden wobble in the prospects for the Irish economy – all dangers obviously foreseen by Wilbur, but denied by the Irish establishment.

Wilbur has wiped Michael's eye. But not to worry. Last week in the Dail Michael insisted that he has "no current plans to start selling the Government's 14pc stake".

Now where did we hear that before? The difference is that Michael missed the boat.

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