Goldman Sachs to advise Government on pro bono basis

US bank will advise on how best to reconfigure lender’s capital stucture in advance of sale

Goldman Sachs   was appointed by the Department of Finance following a tender process. Photograph: Brendan McDermid/Reuters

Goldman Sachs was appointed by the Department of Finance following a tender process. Photograph: Brendan McDermid/Reuters

 

Goldman Sachs is to advise the Government in relation to State-owned AIB on a pro bono basis.

The US investment bank was appointed by the Department of Finance following a tender process involving other financial consultancies.

It will advise on how best to reconfigure the lender’s capital structure in advance of a possible sell-off.

In the run-up to the controversial bank guarantee in 2008, Goldman Sachs advised the now-defunct Irish Nationwide on its strategic options.

The lender was subsequently nationalised and bailed out by the State to the tune of €5.4 billion.

Minister for Finance Michael Noonan is hoping to recover all or most of the €20.8 billion spent rescuing AIB through the gradual unwinding of the Government’s stake in the lender.

Key marker

A move to float or sell a significant minority stake is likely later this year and this will be a key marker of the value of the remaining State bank holdings.

“Much of the banking-related work in the Department of Finance this year will focus on AIB,” Mr Noonan wrote in an article in The Irish Times.

“Officials within my department are working with AIB on reconfiguring the capital structure. Goldman Sachs International has been appointed to provide financial advice.”

The department confirmed the appointment of the Goldman Sachs but declined to discuss the financial terms of the contract. It is understood, however, the bank will not charge the Government for the work. A spokeswoman for Goldman Sachs declined to comment.

‘Bizarre and unsettling’

Independent TD Mattie McGrath described the appointment as “bizarre and unsettling”.

“The decision by the Minister to appoint Goldman Sachs as the lead adviser on how to maximise the return of state funding in our banks is a disgrace,” he said.

“This is a company that is mired in the manipulation and defrauding of investors in the United States as well as being a company that continually misstated and omitted key facts to the US Securities and Exchanges Commission in 2010.”

“This is to say nothing of the hundreds of millions of dollars it has been fined for these activities.”

“Yet this is the same company that our Minister for Finance believes is the most reputable and secure organisation to advise him and the Irish people on the best way to see our money returned to us?,” Mr McGrath said.

“It defies belief and it speaks very clearly to the closed world of financial insiders for whom there is no such thing as an action which precludes you from future speculations with other people’s money,” he added.

Speaking on RTÉ’s Morning Ireland Minister of State at the Department of Finance Simon Harris said the Government was bringing in expert advice to ensure it took pursued the best option in relation to AIB.

“One would have to imagine in a market where there’s more competition, and our banks are returning to profitability, that there may be better value for the taxpayer in the markets,” he said.