26th July 2011
A group of nine investors including two from Canada and the US are reported to have paid euro 1.1bn for anywhere between 17 and 37 per cent of Bank of Ireland partly dependent on a rights issue. Though names have not been disclosed officially, the investors are thought to include Canadian group Fairfax Financial Investors and US buyout firm WL Ross & Co reported here on Reuters.
The Irish Independent says that Ireland can add that billion to other savings and has now shaved around euro 6bn off previous estimates of what the bank bailout could cost it.
However the Irish Times is worried that the private equity investors have landed themselves a bargain and wonders if the Government might have held on to the shares for six months or longer.
However it concludes that Ireland could ultimately benefit.
"The subsequent attraction of outside investors into the banking system that has suffered the worst losses in the developed world as a result of the global credit crisis and a domestic property bubble may help to sustain a positive feedback loop that will see confidence about Ireland return both internationally and at home.
"If that happens, then the Government may be able to argue that whatever they lost on the Bank of Ireland swings yesterday, it was able to recoup on the recovery roundabout."
Financial columnist Thomas Malloy on the Irish Independent is a little more suspicious.
"If you strip out the unnecessary secrecy and mumbo jumbo surrounding the deal, it effectively means [which Irish finance minister Michael] Noonan is selling a large stake in the bank for a very small amount of money to a few vulture capitalists and some venerable pension funds.
"This is not quite the resounding international vote of confidence Noonan would have us believe, but it is a credible beginning that could lead to bigger and better things both at Bank of Ireland and elsewhere," he writes.
However he is happier that the investors are taking the risk themselves without any need for the state to indemnify them.
He adds: "It had been widely assumed that the State would have to indemnify any organisation buying a stake in an Irish lender because the banks have been so wildly inaccurate when it comes to calculating their losses. Bank of Ireland's new investors have received no such guarantees, which implies that they trust the stress tests which were published in March."
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