Rescue deal imminent at MMI Stockbrokers
A consortium of investors headed by a British stockbroking group is now expected to take over MMI Stockbrokers and inject sufficient finance to get the group out of its severe cash-flow difficulties.
Last night, the Central Bank said it had extended MMI's period of grace until next Tuesday. But it is understood a rescue package is imminent and MMI may be operating normally - without the current restrictions on trading imposed by the Central Bank - early next week.
It is understood that MMI's recently-appointed managing director Mr Tim Murphy is putting the finishing touches to the rescue deal and the financial due diligence has been completed. Informed sources believe that Mr Murphy is likely to remain as managing director under the stockbrokers' new ownership.
A spokesman for the Central Bank said that the bank would not have extended MMI's period of grace "unless we believed there was strong reason to do so".
Informed sources believe the Central Bank and the Irish Stock Exchange are satisfied with the credentials of the British consortium and that it will inject enough funds to relieve MMI's shortfall of an estimated £2 million.
It is believed that, given MMI's parlous state, the rescue will involve a complete change of ownership with MMI's founders - Mr Oisin Fanning, Mr John Curran and Mr Paul Boucher - withdrawing from the broking operation to concentrate on the original moneybroking business. The liquidity crisis that affected MMI Stockbrokers did not involve the other parts of MMI's business.
It remains to be seen how actively the new owners of MMI pursue the estimated £2 million debts from MMI clients who availed of the controversial rollover arrangements for investment, in particular, in Dana Petroleum shares. MMI's problems first came to light three weeks ago when it emerged that the British group SBC Warburg had withdrawn its support for the "roll-over" facility that MMI provided for its clients. Under this arrangement, clients were able to buy shares but could postpone payment in anticipation of a rise in Dana shares which would cover their outstanding positions and their debts to MMI. About 100 clients are thought to have been involved.
But the collapse in the value of Dana shares meant that many of these clients owed money to MMI for shares they had bought at more than 20p but which were subsequently worth around 8p.
Many of these clients simply refused to pay their bills and this led to MMI's cash crisis.