US funds that flocked here named in US price-fixing case
Ireland's reliance on a clutch of US private equity firms to buy up nationalised bank assets is set to come under scrutiny as a long-running price-fixing case comes to a head in the US.
A who's-who of firms active here have been named in a US lawsuit taken by investors who claim the finance houses acted together to keep down the prices they paid for assets during the leveraged buy-out boom that ran until 2007.
The complaint, filed in December 2007, originally listed 19 leveraged buyouts and eight related transactions in which the private-equity firms were accused of short-changing shareholders in target companies out of billions of dollars by agreeing to keep a lid on takeover bids.
The defendants all deny the accusations.
Papers filed with a court in Boston last Thursday show that all but one of the firms - Carlyle Group, which has partnered with the State's National Treasury Management Agency to set up a fund to lend to Irish businesses - have settled the court case.
Blackstone, KKR and TPG were the latest of the firms to agree to pay a combined $325m (€242m) to settle the claims, according to papers lodged with the court.
The National Asset Management Agency (Nama) and IBRC, formerly Anglo Irish Bank, have sold assets with a total value running to billions of euro to Blackstone and KKR. TPG is best known as a Ryanair shareholder.
Goldman Sachs Private Equity and Bain Capital, also active here, had earlier agreed to pay millions of dollars in settlement of the claims.
Those two firms were among the winners to come away with large-scale purchases from the liquidation of IBRC earlier this year following a competitive bidding process.
Goldman Sachs Private Equity was one of the firms that successfully bid for a share of IBRC's €9.3bn "Project Stone" portfolio of property loans.
Bain Capital's Sankaty Advisors unit was among the firms to succeed in bidding for IBRC's €7bn "Rock & Salt" portfolio. US private equity houses as a class dominated the bidding for the massive sell-off of €19.6bn of former Anglo Irish Bank and Irish Nationwide Building Society (INBS) assets, the most important sale of boom-era banking assets.
There is no evidence of private equity firms colluding to keep a lid on prices in Ireland. Their willingness to buy here when European investors would not means the Government has relied on US funds to bring in the cash used to pay off banks' boom-era borrowings.
The settlements outlined in Boston in relation to the US case still need approval from a judge.
"Plaintiffs have overcome defendants' attacks on multiple fronts, including early efforts to transfer the case, dozens of motions to dismiss and for summary judgment," said the plaintiffs' lawyer, Thomas Undlin, in the filing.
The complaint alleged that prices were held down when private-equity firms formed groups to try to buy companies.
The firms were accused of agreeing not to compete for each other's exclusive deals and allocating transactions among themselves.
The settlements will be invalidated if the class, or group, of tens of thousands of potential class-action plaintiffs isn't approved by the court at a hearing scheduled for 4 September in Boston, according to the filing. The parties will seek preliminary approval of the accords at the same hearing.
The case against the private equity firms was taken by investors including the Police and Fire Retirement System of the City of Detroit pension fund.