SHAREHOLDERS in Irish Life & Permanent (IL&P) are being urged to band together and press their case to retain a significant stake in the group, even after the Government pumps in €2.3bn to meet banking regulations later this year.
One shareholder, Scotchstone Capital, says action needs to be taken to ensure that IL&P's current shareholders will be left with at least 44pc of the business after the Government's cash injection.
The call for shareholder unity comes ahead of IL&P's annual general meeting on May 18, which will be the first opportunity for shareholders to voice their concerns since the plans to take the group into state control were announced. Scotchstone Capital is an investment company registered in Malta.
In a letter seen by the Irish Independent, Scotchstone says IL&P's board members have a "fiduciary duty to protect shareholder value" by insisting to the banking authorities here that money raised from the sell-off of IL&P assets must be treated as a shareholders' contribution to the bailout.
It comes as IL&P looks certain to be taken into majority state ownership because it needs around €4bn to meet capital requirements set down by the Financial Regulator.
The cash is needed to enable Permanent TSB, a subsidiary of IL&P, cope with potential losses that were outlined under the bank stress tests published at the end of March.
IL&P expects to raise €1.7bn from selling off some of its own assets but the State is the only player likely to put up the other €2.3bn in cash that is needed to reach the target.
Scotchstone says it wants IL&P's directors to protect the current shareholders by resisting pressure to dilute their stake in the company. It says €1.7bn raised from IL&P's own assets should be treated as the current shareholders' contribution to the recapitalisation of the bank, because they are currently the only owners.
In that case, it says, the shareholders would still have a 44pc stake, with the Government getting a majority holding in exchange for its cash.
The letter has been circulated by Piotr Skoczylas, managing director and fund manager at Scotchstone Capital. He was an investment banker at Morgan Stanley and Credit Suisse before joining the firm.
He is calling on other shareholders to act collectively by engaging with the board of IL&P and with the Irish banking authorities to press their case for retaining a significant stake in the banking and insurance group. The letter was circulated to IL&P's 200 biggest investors.
It says that it is critical for shareholders to "close ranks" on the issue and that investors should attend IL&P's annual general meeting in Dublin on May 18.
Scotchstone says it wants to avoid legal action but that such action would remain as a last resort "if anyone wanted to deprive us of our basic ownership rights".
Shareholders had hoped for a chance to vote at the AGM on plans to sell off the group's life-insurance arm.
However, it has emerged that the agenda for the event was set before news of the planned sale, so decisions arising from the results of the stress tests will have to be postponed until an emergency general meeting at a later date.