Group tells banks of multibillion euro fund available

THE FUND manager group vying with private equity to invest in Irish banks has told the four publicly-quoted institutions that it has a potential fund of €5 billion to €6 billion to invest.

The group will invest on condition that the State injects a similar amount and that certain other conditions are met.

Corporate advisers from Deutsche Bank, which is working for the institutional investment group led by AIB Investment Managers, Irish Life Investment Managers and Bank of Ireland Asset Management, met the chief executives and chairmen of the four public banks yesterday to outline its proposals.

The banks were told that there was an appetite among international institutional investors to inject billions in fresh capital in the banks, although this depended on the State matching this in a co-investment and on the terms and cost of the State's investment.

Investors would provide less capital if the Government was to charge a high coupon (dividend) on any preference shares it takes in one or more banks.

The scale of the investment would also depend on how much the State co-investment diluted the value of the banks' existing shareholders who are part of the investment group.

The banks were told that the institutional investors have an order of preference on the banks they would invest in and that they would invest most of the potential fund available - between €4.5 billion and €5 billion - in the two big banks, AIB and Bank of Ireland.

The institutional investment group would also provide some financial support to Irish Life Permanent, which has a funding problem rather a shortage of capital, on the basis that the State guarantees longer-term bonds sold by the bank to improve its funding requirements.

Other conditions would also be attached to any co-investment.

International private investors are also reluctant to invest in some of the guaranteed institutions.

Minister for Finance Brian Lenihan has said that the Government would be willing to co-invest with private investors and would be open to "evaluating" private investment proposals.

The banks are still unclear as to the form a co-investment by the State may take, as there has been a marked slowdown in the pace of talks concerning recapitalisation.

The European Commission has revised its stance on the refinancing of banks with a co-investment of State and private money. The commission has created concessions providing automatic clearance for deals that involve private investors taking stakes of more than 30 per cent in banks where a state makes a similar investment.

Executive directors of Anglo Irish Bank returned from overseas meetings with investors on the bank's annual results roadshow to attend a scheduled meeting of its board yesterday, according to a spokesman for the bank.

The board meeting was attended for the first time by the two new State representatives on the board - former Fine Gael leader and finance minister Alan Dukes and former revenue commissioners chairman Frank Daly - who have been appointed under the terms of the State guarantee scheme to "promote the public interest". Mr Daly and Mr Dukes were appointed from a panel of 12 individuals set up by Mr Lenihan.

Anglo's finance director Willie McAteer attended a meeting with Department of Finance officials yesterday.

A source close to the bank and the department spokesman described the meeting as routine.