Business Irish

Monday 23 April 2018

Consortium rules out €2bn investment after Noonan rejects its bid for EBS

Laura Noonan

A CONSORTIUM of international investors who were once set to invest up to €2bn in Ireland's banks have now ruled out spending any money here after their bid for EBS fell at the final hurdle.

The Cardinal consortium, which includes US private equity giants Wilbur Ross and the Carlyle Group, was recently picked as the preferred bidder for the building society.

But yesterday, the National Treasury Management Agency issued a surprise announcement stating that the lengthy EBS sales process had been "terminated" at the direction of Finance Minister Michael Noonan.

"Having evaluated at length the proposal from the consortium, it was concluded that the bid was not sufficiently commercially attractive to the State to merit continuing with the sale process," the NTMA added.

Cardinal swiftly issued its own statement expressing "extreme disappointment" and stressing that the consortium demonstrated "commitment and goodwill to Ireland and the troubled banking sector".

It is understood that the consortium has ruled out getting involved in any further purchase of Irish banking assets in "frustration" at the way the EBS process was handled.

Market sources also described the news as "very damning" from an international perspective. "Anyone else looking at Irish assets will see that some big names who've put a lot of time into it have been rejected," a source said.

In its statement, Cardinal stressed that it had been prepared to invest more than €600m in EBS, money that "would have minimised the already significant burden on the Irish taxpayer".

Other sources point out, however, that this investment is significantly less than the amount the Government will have to put in before the building society is sold.

EBS is already on course to have €925m of state cash, and could need another €1bn under today's stress tests results. The State may have been concerned about putting in that cash and then handing over the bank.

The Government, it is believed, also harboured concerns about an aspect in Cardinal's bid that would have left the State with some liability for future losses.

It is understood that Cardinal was prepared to pay 100pc of the first €300m in losses, 20pc of the next €250m and 10pc of anything between that threshold and €1.4b as well as all losses on new loans.

Cardinal also says its bid would have weaned EBS off all Central Bank funding within three years, as backing from the consortium helped EBS tap the US money markets.

The Cardinal venture was put together by Dubliners Nigel McDermott and Nick Corcoran, who had previously tried to invest into Bank of Ireland and AIB under the Mallabraca name. The other two investors were US billionaire Wilbur Ross' leveraged buyout firm and the global investment giant the Carlyle group.

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