Three banks may secure 20% of firm's Irish businesses

ANALYSIS:Anglo Irish, Bank of Ireland and KBC are being offered a stake as part of a rescue deal, writes BARRY O'HALLORAN

THREE BANKS could end up with around 20 per cent of house building group McInerney Holdings’ Irish businesses if a deal to save the companies involved is hammered out by the examiner appointed by the High Court yesterday.

The court confirmed the appointment of Billy O’Riordan of PricewaterhouseCoopers as examiner to McInerney Homes and four other group companies, giving them protection from creditors, including a syndicate of three banks owed a total of €111 million.

The banks, State-owned Anglo Irish, Bank of Ireland and Belgian-controlled KBC, are being offered a stake in the business as part of a rescue deal proposed by a potential backer, US-based Oaktree Capital, that also involves them writing around €50 million off the total debt.

The stake the banks would receive would be tied to just how much they would be prepared to write off the debt. The larger the write-down, the bigger the stake in the company they will receive.

The figure on the table is around 20 per cent of the Irish business. McInerney is also in talks with its British lenders, to which it owes around €125 million, and it is also offering them equity in return for some debt forgiveness.

Oaktree is prepared to inject €40 million into McInerney, €10 million in Ireland, the balance in Britain, for a significant holding in the overall group, but that depends on a deal being done with bankers on both sides of the Irish Sea.

Such a division of the group, which is a plc, would considerably dilute the interests of existing shareholders and they are going to have to approve any deal that is finally done. The argument runs that the only alternative is receivership, which would leave the shareholders with nothing. They have a chance of getting something back in the long term if the examinership works and a deal can be done with the British banks.

A receivership would most likely lead to a fire sale of McInerney’s operations in England, where the company is currently generating a return.

Oaktree is only interested on the basis that it gets both Ireland and Britain, as the former has assets that it believes will deliver in the long term, while the latter is now generating income.

At this stage, the rescue process faces four hurdles. The first is that Mr O’Riordan has to satisfy the High Court on October 1st that the Irish businesses have a reasonable prospect of survival.

He has to deal with three scenarios: one where a deal is done between the company, Oaktree and banks; a second where the banks can be – theoretically – legally forced to write down their debt and keep funding the companies; and a third where a new lender steps in.

If the examinership gets across the line, Nama will have a say in any arrangement with the banks, as it is due to take over the €70 million or so owed to Anglo and Bank of Ireland by the end of the year.

As shareholders’ interests will be affected, they will have to give their approval, and, along with all that, the British banks, with which talks have been continuing, must also be brought on board.