EBS bidder seeks to share capital target cost

 

THE PRIVATE equity consortium bidding for the EBS Building Society is seeking to share the lender’s new €438 million capital target with the Government and by raising cash from a deal with EBS subordinated bondholders.

The consortium, led by Dublin firm Cardinal Capital Group and backed by US buyout firms the Carlyle Group and WL Ross and Co, is negotiating with Government authorities on splitting the new capital top-up set last Sunday, which is in addition to €525 million to be raised under the Central Bank’s previous capital target for EBS.

EBS must now raise €963 million to bring its capital ratio above 12 per cent – the new target set under the €85 billion rescue plan for the Government and the banks agreed by the European Union and the International Monetary Fund.

Under an earlier offer, Cardinal had agreed to inject €550 million and up to €450 million of further losses, repaying the Government its €350 million injection if EBS returned to profitability and giving the State warrants in the lender.

Cardinal is now also seeking to carry out an exchange or buyback of debt held by EBS subordinated bondholders that could generate more than €100 million to help meet the new target.

The consortium is pressing the Government to name it the preferred bidder for EBS, ruling out the other final bidder, Irish Life & Permanent (IL&P).

The consortium is understood to claim that the further €98 million capital target set for IL&P under the EU-IMF banking plan and the further capital required at EBS – as well as fresh concerns around tracker mortgages that make up 60 per cent of IL&P’s €27 billion Irish loan book – weaken its chances of taking over the society.

IL&P is, however, confident it can take over EBS, although its bid is expected to change.