Wednesday 21 March 2018

US equity giant will now lend direct to Irish SMEs

Blackstone paid €67m for Dublin's former Burlington Hotel in 2012 for its first major deal in this country
Blackstone paid €67m for Dublin's former Burlington Hotel in 2012 for its first major deal in this country
Peter Flanagan

Peter Flanagan

The world's biggest private equity firm is ready to lend to Irish businesses as it moves to fill a gap in the market left by Ireland's shrinking banks.

The Irish Independent understands that New York-based Blackstone Group is open for business to provide financing to SMEs in Ireland.

The firm has not publicly announced its plan but is ready to consider deals if approached by a borrower.

Blackstone is targeting companies at the higher end of the SME spectrum, which are defined as having a turnover of up to €250m.

The business will be carried out through Blackstone's credit investment arm, GSO Capital Partners. Last week GSO agreed a partnership with Italian bank Intesa to provide financing in that country.

While Blackstone is not planning a partnership of that sort, any investments will follow a similar tack.

The Italian plan will focus on so called "sub-investment grade", medium-size companies which require capital to finance acquisitions, expansion or to replace existing debt.

Irish SMEs have been devastated by the downturn, with many firms that are profitable at an operating level struggling under legacy debts from the crash.

Many of those debts are related to property deals that turned toxic after the bursting of the bubble.

Most of those companies have traditionally relied on bank lending for their everyday business, with few raising funds through other methods.

Since the crash, however, lending to SMEs has almost dried up from the decimated banking sector. Trade groups, including the Small Firms Association and ISME, have consistently highlighted that its members are struggling to access credit, although some are beginning to get access to lending again.

Blackstone has made a series of investments in Ireland in recent years but its presence has not been without controversy at times.

Through GSO, it built up a 25pc stake in Eircom, leading a consortium that took control of the business after initially buying its debts.

The firm is best known for buying the loans tied to O'Flynn Construction Group for €1.1bn a year ago.

However, that deal turned sour when Blackstone moved to take control of the O'Flynn empire last July.

That case ended up in the courts before being resolved earlier this year.

Blackstone paid €67m for Dublin's former Burlington Hotel in 2012 for its first major deal in this country.

Since then it has gone on to buy a series of assets including the Bloodstone Building - an office block in the Dublin docklands - and took a stake in the companies that control Dublin's Clyde Court and Ballsbridge Hotels. It has since dispensed with that holding.

Blackstone's GSO arm has been one of the biggest investors in Europe in recent years, using about a quarter of its $65bn war chest to finance companies in Europe.

It is not the only firm from overseas to be active in providing financing in Ireland in recent months.

US bank Wells Fargo is the largest commercial property lender in the US, is now assessing its options for the Irish market.

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