EBS raises €90m in debt buy-back deal

THE EBS has netted €90 million through a debt buy-back deal, reducing the building society’s capital requirement to €785 million from €875 million.

At the end of June, the EBS bought back bonds worth €250 million at a discount of more than 35 per cent. The bonds related to €125 million of debt issued by Green Island Capital Securities and €125 million issued by ChessCapital Securities.

The debt buy-back deal means EBS’s €875 million capital shortfall – and hence the potential bill to the tax-payer – has been reduced by €90 million.

The Government has pledged to fund the building society’s short fall if private investment is not forthcoming.

Already the Government has injected €350 million – €100 million in cash and €250 million by way of promissory notes or IOU’s – to maintain EBS’s capital ratios. The society needs €875 million to meet the core equity ratio of 7 per cent set by the Financial Regulator.

Meanwhile, New York-based private equity company JC Flowers has emerged as the fourth bidder for the building society. The company had been in discussions with Cardinal Asset Management, a firm led by Dublin executives Nick Corcoran and Nigel McDermott, about a potential joint bid for the EBS.

It is understood that the US private equity firm is now mounting its own bid for the EBS. London-based private equity firm Doughty Hanson, Irish Life and Permanent Plc and Cardinal Asset Management are the other three interested suitors. Cardinal is believed to be in discussions with another private equity company in connection with its bid for EBS.

The Department of Finance has indicated, since the announcement of the bank recapitalisation plan in March, that it is keen for the institution to secure private investment. The 75-year old mutual society is to transfer approximately €1 billion into the National Asset Management Agency (Nama)

The Minister for Finance Brian Lenihan said on Tuesday that it is envisaged that the process would be finalised by August.