WILBUR ROSS BETS ON SHARP IRISH RECOVERY From the website of AIB Global Treasury Services www.fxcentre.com
Source: Business World
Tuesday, 2nd August 2011 07.12am
A growing number of potential investors are being prompted to look at Ireland by positive news now coming from it, according to billionaire Wilbur Ross.
Ross invested 300m euros last week in Bank of Ireland.
Ross surprised many by joining Canadian firm Fairfax Financial and California’s Capital Group in a 1.1bn euro investment in the bank, the first significant foreign investment in Ireland’s banking sector since it collapsed in 2008.
Ross said the deal was fuelled by positive news from Ireland that indicate it is breaking away from its troubled peers in southern Europe and embarking on a solid recovery.
These include the government’s announcement it was ahead of target to bring its budget deficit under control, lack of protest against a harsh austerity programme, and the European Union’s decision this month to ease the terms of an 85-billion-euro international bailout.
“The macro picture of Ireland … is clearly headed in the right direction and will very likely have a more v-shaped recovery than most other European countries,” Ross told Reuters in a telephone interview.
“We have gotten a lot of inquires from other investing institutions that know us, asking about Ireland and suggesting that they at least are now willing to take a much better look than they were prior to all of this.”
Irish sovereign debt prices staged an impressive rally last week in spite of growing bond market volatility elsewhere in the euro zone, in part due to the vote of confidence from the investment in Bank of Ireland. Ross said he was heartened by a lack of social unrest in Ireland and, unlike Greece and Portugal, Ireland was expected to return to growth this year because of a vibrant export sector and the flexibility of its economy. “I am genuinely impressed and have been for some time at the way Ireland bit the bullet and faced up to it,” Ross said. “Unlike the Club Med economies, the former government and the present one have dealt very surgically and very quickly with the problem.” A key development was a euro zone deal that eased the terms of Ireland’s bailout and positive comments from the International Monetary Fund that Ireland’s program is on track, assuring investors that Ireland had virtually guaranteed funding through 2013. “Since they are fully funded at sovereign level to 2013, there can’t be a government bond auction that could be undersubscribed and precipitate a problem,” Ross said. “There is no other country in Europe that can say they have that.” The guaranteed funding limits Ireland’s exposure to a possible Greek default, which Ross said he believed “would not have that much effect” on Ireland. Solid growth in the broader economy was likely in the second half of next year, Ross said, but he warned it would take longer for Bank of Ireland to turn a profit. The lender’s consumer business may be dampened by high unemployment, an indicator that is likely to take longer to recover than headline GDP growth. “We don’t see next the few quarters as being profit, it would be very hard for that to be the case as there are probably some meaningful loan losses yet to take,” he said. Ross, who manages some USD 10 bn in investments, is known for consolidating out-of-favour assets in areas such as autos, steel and coal and has recently invested in small, regional U.S. banks. He said he was attracted to Bank of Ireland by the high quality of its management, the fact that half of its assets are outside of Ireland, and the value of its insurance arm. Under the deal, brokered by the Irish government, Ross’ New York based buyout firm WL Ross and Co will take a 9.9 pc stake in Bank of Ireland for 300 m euros. He said he will not increase its stake as any additional investment would bring regulatory complications. Ross said the 10c per share he paid was far below his estimate of the bank’s book value of around 26c per share, giving a buffer against future losses. The new investors, who together will hold 35 pc of Bank of Ireland compared to the state’s stake of 15 pc, have no plans to change the bank’s management, Ross said. “Our intention to keep them in place,” he said. Ross said he is open to other Irish investment opportunities, but would focus on Bank of Ireland. He refused to rule out a bid for the life insurance arm of Irish Life, but said it would be only possible if his company found an insurance firm to partner with. “We believe in Ireland so we will look at other assets, but this (Bank of Ireland) will be a very big project,” Ross said. “This will be our primary focus.”
Blog posted by Kenny Kane, Director, Quintas Wealth Management
“I confirm that the views expressed in this article reflect my personal views and is not reflective of the views or opinions held by Quintas, any affiliates, its directors, contractors, officers, employees or agents. The material contained herein includes facts, views, opinions and recommendations which I do not guarantee the accuracy, completeness or timeliness of, nor do I endorse these views, opinions and recommendations. I do not accept any liability for any act (or decision not to act), use, misuse or distribution resulting from use of this material”.
Tags: Bank of Ireland, Foreign Investment in Ireland, Irelands Recovery, Wilbur Ross
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