IL&P faction engages law firm to fight recapitalisation

A GROUP of dissident shareholders in Irish Life & Permanent have hired Dublin law firm Hamilton Turner to make a High Court challenge to the recapitalisation of the bank by the State, which will wipe out the value of their shareholdings.

A letter from Hamilton Turner to shareholders suggests that the shareholders will challenge both the decision of Minister for Finance Michael Noonan to make the order to inject €2.7 billion into the bank and the constitutionality of the 2010 legislation that allowed him to do so.

Under the Credit Institutions (Stabilisation) Act, shareholders have five working days to oppose the High Court order secured by Mr Noonan last Tuesday to recapitalise the bank. Hamilton Turner warns there is “no guarantee” that a successful challenge would “result in further value in the shares being created”.

However, the firm submits that the Minister may wish to settle the case instead of taking the risk that the recapitalisation order is set aside or the legislation declared unconstitutional.

Scotchstone Capital, the Malta-based investment firm that recently led a shareholder revolt against the bank at its egm, contacted shareholders yesterday asking them to pay a minimum of €5,000 to financially back the legal challenge.

The cost to the shareholders of hiring Hamilton Turner is at least €175,000 plus VAT and outlays, based on fees of up to €750 an hour for the services of a partner, consultant or senior lawyer.

“We have to file an opposition to the High Court order by Tuesday afternoon, otherwise, virtually all our worth in the IL&P shares will be lost,” writes Scotchstone managing director Pietr Skoczylas in an e-mail to shareholders.

The e-mail, sent early yesterday and marked “extremely urgent”, called on shareholders to respond by noon yesterday if they wished to support the legal claim.

Hamilton Turner’s letter indicates that if it applies to the High Court on Tuesday, it will seek to outline its case in September.

Mr Skoczylas, voted on to the board last week to represent shareholders opposed to the State recapitalisation, said the challenge would cost €5,000 for a shareholder with 200,000 shares. This increases up to a cost of €43,500 for a holder of four million shares.

The letter warns there might be adjustments to the legal costs if there are not enough claimants, but says it has received pledges from up to 100 shareholders.