FTI Consulting retained in advisory role by BoI suitor

THE FIRM which advised on the failure of Lehman Brothers and worked for the British government on Northern Rock has been retained by the Mallabraca private equity consortium.

Mallabraca, which is talking with Bank of Ireland about taking a possible stake in the bank, has held talks with US advisory firm, FTI Consulting. FTI has worked on the restructuring and communications at troubled financial companies Lehman Brothers, Washington Mutual, AIG and Northern Rock.

The consortium has also picked a new chief executive and Irish representatives who would be appointed to Bank of Ireland's board if it took a stake in the bank.

The Government said on Sunday that the programme to recapitalise the banking system with up to €10 billion would comprise State funds as well as cash investments from private investors and existing shareholders.

Mallabraca will retain FTI as advisers if it proceeds with an investment in Bank of Ireland.

The consortium has had talks with senior FTI managers and the firm's public relations subsidiary, Financial Dynamics, in Dublin. The company has previously worked with New York investment bank Sandler O'Neill, a member of the Mallabraca group.

FTI executives were in Dublin last week to sign a sponsorship deal with golfer Pádraig Harrington. A New York-based spokesman for FTI declined to confirm or deny if a meeting took place with Mallabraca members.

In response to a question about whether management at the banks would have to step down in return for State investment, Minister for Finance Brian Lenihan said there would be "tough talking" with the banks but he would not comment on what this would involve.

Bank of Ireland is resisting private equity investment. It has sought reassurances from the private equity groups interested in the bank to clarify if existing shareholders' interests would be considered in any investment they make and for reassurances that they would not seek a controlling stake.

Mallabraca has indicated in proposals to the bank and during discussions between the parties' advisers that it would allow existing shareholders to participate in a co-investment and that it would not seek a majority stake.

The consortium has €5 billion to invest and is seeking a stake of up to 40 per cent in the bank.

The bank has said it needs €2 billion to €2.5 billion to bring its capital up to British levels. Bank of Ireland believes an investment of this scale would give a private investor a large stake in the bank, given that its share price values the company at €984 million.