Monday 26 August 2019

Oil money behind consortium's bid for Anglo

Joe Brennan

OIL-RICH funds, owned by the Qatar and Dubai royal families, are understood to be major backers of the investment group that once chased Bank of Ireland -- but is now looking to win control of nationalised Anglo Irish Bank.

The so-called Mallabraca consortium was assembled late last year by Irish financiers Nick Corcoran and Nigel McDermott of Cardinal Asset Management and Bryan Turley of Sorrento Asset Management.

The group, also comprised of two major US private equity firms, Carlyle and JC Flowers, is looking to invest €5bn in Anglo to boost its reserves against a tide of losses on bad loans.

Mallabraca's initial plan to take a major stake in BoI unravelled before Christmas as the Government announced its plan to recapitalise the bank and rival Allied Irish Banks.

It was also interested at the time in taking over either Anglo or Irish Life & Permanent as part of a grand plan to gain a large foothold in the troubled banking sector.

The group began talking to Anglo last November, according to sources. They add that former chairman Sean FitzPatrick played a leading role in those negotiations.

Mallabraca maintained contact with the Government in recent months and was rumoured to have been interested in the idea of buying parts of all of Anglo, after a number of years in public ownership.

It emerged yesterday that the consortium had actually been looking to act more quickly. Though its interest has now been put on hold as investigations by gardai and the Office of the Director of Corporate Enforcement continue.

In a letter to the State's National Treasury Management Agency on Wednesday, Mallabraca said that it has lined up David Morgan, former chief executive of Australian bank Westpac, to lead Anglo. It also points to a wider shake-up of the bank by referring to a management team "with international experience".


From a political point of view, a private equity-led takeover of Anglo might be more acceptable than of either of the two main retail banks, AIB or BoI. Such shrewd investors could be best placed to squeeze developers who might otherwise think they will get lighter treatment under a nationalised Anglo.

The consortium has offered to absorb the first €750m of bad loan losses at Anglo, with the State taking up the second €750m -- and both sharing risks from there on.

But other banks fear that the consortium could have an unfair advantage with such guarantees from the Government. They fear a private equity-owned Anglo could withdraw support from some developers, sending them into bankruptcy. This could result in massive losses at other banks exposed to these borrowers, but who do not enjoy the same Government indemnity. Analysts also point out that the proposal in its current form sees taxpayers sharing the risk but none of the upside if Anglo comes out well on the other side of the downturn.

Sources close to the consortium insist that the investors plan to hold onto Anglo for seven to 10 years, rather than try and make a quick buck.

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