THE Irish government has agreed to take part in a €3 billion (£2 billion) bailout of Bank of Ireland that will be led by private equity. The deal would be the first state aid for an Irish bank.
This week a number of private-equity groups will make proposals to BoI. A condition of the government cash injection will be that new investors are locked in for a set time to ensure they don’t try to sell quickly and make a big profit.
Names already linked with a potential investment include Cardinal Asset Management, an Irish investment firm, Sandler O’Neill, Texas Pacific Group and JC Flowers.
Ireland was one of the first countries to respond to the credit crisis with a guarantee for bank liabilities worth some €440 billion, but until now it has not bailed out or nationalised any banks, and they have not raised equity themselves.
Bank of Ireland revealed on Friday it had received unsolicited approaches from several unnamed parties seeking to invest in the group, but said no decision had been made.
Analysts say BoI will need to mollify investors concerned the government is entertaining talks with private-equity groups without consultation.
“The way they are going about it completely undermines the stock exchange,” said one investment manager.
“To treat shareholders like this is appalling. If there is an equity rating going on shareholders should be consulted.”
Bank of Ireland is 70% owned by overseas institutional investors, with about 10% owned by domestic institutions.
The news came as it emerged that Anglo Irish Bank had secured commitments for a capital-raising exercise believed to be in excess of €1 billion. The bank expects the issue to close early next year.
It is understood that in a lengthy meeting on Thursday night Anglo told Brian Lenihan, the Irish finance minister, it was in a strong position to pursue a course as an independent institution, and it could find enough private capital to bolster its balance sheet. Anglo has retained Morgan Stanley to help it source capital.
Both Anglo and Allied Irish Banks are pushing hard to go it alone as the government attempts to drive consolidation in the Irish banking sector.
Irish Life & Permanent is also keen to stay independent and said on Friday it was in merger talks with EBS. The merging of Permanent TSB, its banking arm, and EBS is believed to have been agreed in principle.
November 23, 2008
Source: The Sunday Times