EBS bidder considers flotation value

US BILLIONAIRE Wilbur Ross, an investor in the Cardinal consortium which is in pole position to buy EBS Building Society, said it was considering a stock market flotation to value the potential return on their investment.

Speaking to CNBC television, Mr Ross said the key to securing a return on the takeover of EBS was how quickly Cardinal could get the lender back to profitability.

This would depend on whether Cardinal could bring the building society’s funding costs under control and whether it could write down the mortgages to the value of the market.

“The biggest variable is will we be able to mark the portfolio to market properly and will we be able to get the funding cost down to a manageable level?”

Mr Ross said EBS was losing money on fixed-rate mortgages.

“On their fixed-income parts of the portfolio, in many cases they are literally operating at a negative spread because the cost of borrowing funds by a bank in Ireland is pretty high.”

The consortium, led by Dublin firm Cardinal and backed by Mr Ross and US private equity group Carlyle, was last week chosen as preferred bidder for Government-owned EBS, ahead of Irish Life Permanent.

Mr Ross said the return on the investment in EBS would depend on “what multiple would a future stock market put on it [the building society]”. New York-based private equity firm WL Ross was part of the consortium that bought Bank United, which collapsed during the 2008 financial crisis.

The consortium acquired the bank for $900 million in May 2009 and last month raised $783 million selling about 30 per cent of the shareholding in a flotation, valuing the bank at $2.3 billion.

Mr Ross said he did not expect the same return on EBS as United Bank, the turnaround of which was “very dramatic and very quick – I would be surprised if it was anything like that”.

Mr Ross said he expected the Irish economy to take a year or two to recover. “I believe that Ireland will have a fairly V-shaped recovery.”

Cardinal would negotiate the “fine-tuning” of the EBS deal over the coming months, he added.

The consortium has offered to invest just over €600 million in EBS and to cover a further €450 million of potential future losses.

“Ireland is going to go through a rough period but the Irish people are very resilient,” said Mr Ross. “The Government has moved there very aggressively to deal with the problem.”