EBS sets closing date for bid offers

THE EBS building society has set July 2nd as the closing date by which interested parties must submit prospective offers for the institution. The confirmation of a specific date came as Irish Life and Permanent (ILP), one of the main suitors for the building society, had its outlook revised to “negative” from “stable” by rating agency Standard & Poor’s.

Earlier this week it emerged that IL&P intends to hold discussions with the EBS about a possible merger in the coming weeks. This followed EBS’s announcement that it was expanding its discussion with private equity investors to include other parties. The EBS had been negotiating with an investment consortium led by Cardinal Asset Management since March.

The building society is shortly to open a data-room to assist in the due diligence process for interested parties.

Yesterday, rating agency Standards & Poor’s downgraded its outlook for ILP to “negative” due to what it described as its “weak financial profile” which it said “will persist for the foreseeable future”.It added that “strategic uncertainty over the future role of the banking operations within the group” was also a factor.

The rating agency left ILP’s and Irish Life Assurance’s long-term BBB+ rating and ILP’s A-2 short-term rating unchanged.

However, it said it could lower the ratings if it considers ILP will not return to profitability in 2012, if Irish Life’s earnings performance significantly weakens, or if the bank’s medium-term credit profile is no longer commensurate with a BBB+ rating.

In an investor note yesterday which was issued before the S&P downgrade NCB Stockbrokers, which is advising the EBS on its restructuring plans, said that in order for a merger between ILP and the EBS to be viable, the new entity would have to receive an “A” credit rating.

ILP closed 2.5 per cent lower yesterday at 1.60. The under-performance of ILP’s share price since its re-emergence as a potential acquirer of the EBS earlier this week was noted by one market source yesterday, who stressed that funding remains a major issue for the bancassurance group.

ILP, which is the only Irish financial institution not involved in Nama, has previously indicated that it would seek to generate €700 million from a rights issue to meet a €900 million capital bill for its loss-making banking unit, Permanent TSB, which it hopes to spin off.

ILP posted a pretax loss of €319 million for 2009 as increased bad debts and higher funding costs left Permanent TSB with an operating loss of €270 million. Last month the banking and pensions group said it may bid for ICS Building Society when Bank of Ireland puts it up for sale later this year.