Business Irish

Saturday 16 December 2017

US billionaire Wilbur Ross buys into BoI in new deal

Independent.ie reporters

US billionaire Wilbur Ross is amongst a number of private investors who have bought up more than €1.1bn in Bank of Ireland shares saving it from State ownership, Independent.ie has learned.

Earlier this year Mr Ross tried to gain control of EBS Building Society but failed.



The billionaire, who is also known also known as the “King of Bankruptcy” in the US, formed a consortium with private equity giant Carlyle Group and Dublin-based Cardinal Group to bid for the EBS.



However, it is understood that while Carlyle is not involved in the Bank of Ireland deal it is not clear whether Irish-backed Cardinal Capital is an investor.



Mr Ross's New York-based company, WL Ross & Co, owns American Home Mortgages Services, which focuses on the subprime mortgage market and it is not yet known why he would be interested in an overall banking play.



But market sources said good news from Europe on our debt situation with better terms and conditions to deal with our debts on the back of the Greek bailout has made Ireland more attractive to outside investors.



The other investors are as yet unknown but they will have to show their hands later this week if they pass over a 3pc shareholding in the bank under stock exchange rules.



The latest deal will save already burnt taxpayers some money but the bank still needs to raise a significant amount of additional capital.



Finance Minister Michael Noonan said the Government negotiated the deal overnight, which he described as a major step in its plans to radically restructure the banking system.



Subject to appropriate regulatory clearances, the investors have committed to buy up to $1.123bn of the State's shares in Bank of Ireland, cutting the amount the Government has to fork out to capitalise the troubled-institution.



Mr Noonan said: "The commitment by a number of significant private sector investors to invest side by side with the State's retained holding without any form of additional risk sharing by the State reaffirms the credibility of our stress tests and the health of our banks after the PCAR exercise.



"After taking into consideration shares already held by private investors, this transaction will result in a minimum private sector ownership of 68pc in Bank of Ireland.



"This investment is tangible proof of growing international confidence in the future prospects of both Bank of Ireland and the Irish economy."



The investors will initially purchase on an unconditional basis €241m of the State's shareholding, with a commitment to purchase up to another €882m worth.



The State will continue to hold a minimum shareholding of 15pc with up to a maximum of 32pc.



Mr Noonan said the deal - and recent successful cut of Ireland's interest rate on its EU bailout - was another very positive development for the Irish economy.



In a statement, the Governor and company of the Bank of Ireland said: "The bank is very pleased to see this major endorsement of the bank's strategy and the confidence which these investors share with the bank in the future for the Irish economy.



"The bank very much appreciates the opportunity which the minister has provided to the bank to seek private capital sources to support its capital-raising programme and to enable its existing stockholders to participate in the rights issue component of the capital-raising programme," it added.



When the deal is finalized, the Government will hold between 15pc and 30pc of Bank of Ireland – this figure would be 99pc had the private investors not been found.



The investment will take place later this week in a share sale of 4.2bn ordinary shares with a potential that they would buy up more.



Meanwhile, AIB reported an underlying loss of 2.6bn for the first six months of the year.



The financial institution revealed there was a fall in customer deposits, with loans and receivables to customers down.



However its interim results also revealed AIB made a profit of €2.2bn from the sale of its share in Polish bank Zachodni, and capital initiatives taken in.

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