Wednesday 22 November 2017

Sunderland FC chief proposed €2bn bank fund

Irish-American billionaire met officials over plan

Nick Webb

Nick Webb

Ellis Short, the Irish-American billionaire who controls Premiership football club Sunderland, proposed a plan to raise a €2bn fund for Irish banks.

Documents obtained by the Sunday Independent reveal that David Dillon, of top corporate legal firm Dillon Eustace, approached the Department of the Taoiseach (then led by Brian Cowen) on behalf of Short back in February 2009.

According to an internal memo, "he mentioned that he has a substantial client with a track record in turning around financial institutions, and is a major player in the field of private equity".

It adds: "Twice during our conversation David mentioned the issue of the raising of €2bn."

It also noted that the client had "specific experience with the turnaround of the Korean Exchange Bank".

A meeting in the department with principal officer George Shaw and Mr Dillon was arranged for the afternoon of March 2 in Government Buildings. A further meeting involving Mr Short and the Department of Finance was arranged for later that month and information was circulated to John Corrigan at the NTMA and Kevin Cardiff at the Department of Finance, according to the memos released under the Freedom of Information Act.

However, despite the meetings and presentations, the proposed €2bn investment fund was not taken up by the Government.

The State subsequently took control of AIB, EBS and Irish Nationwide having failed to attract private investors. Bank of Ireland is now the only domestic bank not fully owned by the State after billionaire Wilbur Ross and a consortium of Canadian investors ploughed €1.1bn into the institution following its recent rights issue.

Mr Short was one of the founders of the €20bn Dallas-based Lone Star Funds with billionaire John P Grayken. Mr Short became an Irish citizen two years ago, while Mr Grayken is thought to have taken out Irish citizenship in the 1990s.

Lone Star bought close to €26bn worth of assets ranging from "financial institutions, real estate, debt instruments and selected corporate opportunities between 1996 to 2007", according to the documents. The assets of these funds "have now been largely sold, with capital plus significant profits returned to Lone Star investors".

The documents also reveal Mr Short's extensive experience in dealing with bombed-out banks. He moved to Japan in 1997 during the country's banking crisis, becoming the "the first and largest" purchaser of portfolios of bad loans from the Japanese banks. Lone Star also bought troubled Tokyo Sowa Bank, which had €15bn in assets.

Lone Star "performed a valuation of the assets in the bank and paid a firm price to the Japanese government without any further asset guarantees or financial commitment from the government". The bank was sold in 2006 for a substantial profit.

Mr Short also played a major role in Lone Star's investments in South Korea after the Asian financial crisis, becoming the largest buyer of distressed loans from the banks. It also bought into the Korean Exchange Bank in 2003, which is now being sold, representing a major pay day for investors.

Lone Star has also been linked with a move for some of Anglo Irish Bank's $10bn US loan book.

Short took control of Sunderland Football Club in 2008 with Irish manager Roy Keane leaving soon after.

Sunday Indo Business

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business