Dublin bank targeted by UK firm involved in Italian rescue

A UK distressed debt investor that has been at the centre of a rescue plan for Italy’s third biggest bank, Monte dei Paschi di Sienna, has emerged as the leading bidder for a niche bank being sold in Dublin.

Sources said Attestor Capital in London is the preferred bidder for EAA Covered Bond Bank in Dublin, which is being sold under the wind-up of failed German bank WestLB.

In the past two years, Attestor Capital has been involved in the acquisition of parts of nationalised Austrian lender Kommunalkredit, a rescue investment in Spanish renewable energy company and purchase of Italian shipping loans, among other deals.

More recently, it led a group that bought €1 billion of junior debt in Monte dei Paschi, with a view to converting the securities into an equity stake as part of a €5 billion recapitalisation plan for the troubled Italian bank. The bank said on Thursday that, while it couldn’t immediately convert this debt into shares, it might do so in the future.

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Italian referendum

The high-stakes rescue capital raise – including a planned share sale – may be thrown into jeopardy if markets react negatively to an expected rejection by Italian voters of a referendum on Sunday aimed at streamlining government and, ultimately, shoring up the country’s moribund economy.

Meanwhile, Attestor Capital’s interest in EAA Covered Bond Bank, a specialised bank focused on issuing covered asset securities backed by public-sector assets, came after the business was put up for sale earlier this year. The process, known as Project Blue, is being managed by KPMG.

Dusseldorf-based WestLB, which made a failed attempt to become a global investment bank, became one of the biggest German casualties of the 2008 financial crisis and needed a bailout of as much as €18 billion by the state and rival lenders. Much of its assets were put into a bad bank, called Erste Abwicklungsanstalt, or EAA, in 2010.

EAA Covered Bond Bank had €471 million of equity at the end of last year. However, it is understood that much of this has been extracted by way of a dividend to its parent since then.

While EAA Covered Bond’s assets are currently being run down, the buyer may wish to rebuild the business and possibly seek regulatory approval to widen its scope. Irish law allows for lenders to be established in the country to issue asset-backed public sector, mortgage and commercial property loans.

Any deal would ultimately have to be approved by the European Central Bank.

The Irish Times previously reported that US private equity firms JC Flowers and Apollo were among bidders circling EAA Covered Bond Bank.