Oaktree plans multimillion euro bonus ahead of IPO

Three directors behind a new Irish housebuilding company being prepared for a €350 million initial public offering by US private equity group Oaktree are set to benefit from a multimillion-euro share incentive scheme, The Irish Times has established.

A company called Glenveagh Properties, which was established in recent weeks, is the vehicle that is being lined up for flotation, according to sources familiar with the plan. The firm will have to change its structure from a limited company to a public limited company before the initial public offering (IPO), which is expected to take place within the next six weeks, following an investor roadshow in September.

Oaktree, among the most active buyers of distressed Irish property loans and assets in recent years, has been working for some time with Maynooth-based builder Bridgedale, led by Stephen Garvey, on a plan to combine assets in a vehicle and float it on the stock market to take advantage of a shortage of homes in the Republic.

The Irish Times reported in July that Justin Bickle, a managing director with Oaktree's European operation in Dublin, was preparing to take on the role of chief executive, while former Nama executive John Mulcahy was being lined up as chairman.

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Filings for Glenveagh Properties with the Companies Registration Office show that Mr Bickle and Mr Garvey have each been awarded 90 million so-called founder shares in the company and Mr Mulcahy a further 20 million. All told, the founder shares equate to 14.3 per cent of the company’s current authorised share capital.

Company’s constitution

The company’s constitution states that the founder shares, which do not carry rights to dividends or a vote at shareholder meetings, may convert into ordinary shares in Glenveagh over time, subject to certain targets – such as annual total shareholder returns – being met. The exact objectives have not been outlined.

A spokeswoman for Oaktree declined to comment and a call to Bridgedale’s offices seeking comment from Mr Garvey wasn’t returned, while Mr Mulcahy refused to be drawn on the process when contacted.

The founder shares are along the lines of an incentive plan built into the flotation of Cairn Homes, which two years ago became the first Irish housebuilder to IPO in almost two decades. Rather than take money at the time, Cairn's three founders – chief executive Michael Stanley, his brother Kevin and Scottish accountant Alan McIntosh – received 100 million founder shares in the company, entitling them to receive 20 per cent of total shareholder returns over seven years.

To date, almost 53 million founder shares have been converted into ordinary stock, worth about €87 million.

Executives at Oaktree and Bridgedale behind Glenveagh, who began courting investors in July in a non-deal roadshow managed by their advisers at Credit Suisse and Davy, are preparing to formally launch the IPO plan in the coming weeks.

Corporate restructuring

Market sources have said that the new company will contain as much as €100 million of assets initially, including land that Oaktree acquired in recent years.

It is understood that all of the assets of Bridgedale, which has also been undergoing some corporate restructuring and constitution amendments in recent weeks, will be folded into the listed company.

Oaktree and Bridgedale’s decision to go down the IPO route comes as the latest data from the Central Statistics Office shows that home price inflation was running at an annual rate of 11.6 per cent in June. However, industry sources say that banks, rattled by the financial crisis, are demanding that builders provide much more equity to deals than during the boom.

Banks are typically lending at 50 per cent loan-to-value for site acquisitions with full planning permission and about 70 per cent loan-to-cost for work in progress, according to a recent analysis by Deloitte Ireland.