North American approaches lead IL&P to look at trade sale

IRISH LIFE and Permanent has received expressions of interest for its life business from possible trade buyers in North America, prompting the group to explore more deeply the possibility of a trade sale ahead of a flotation.

The approaches from the interested parties, which were made in recent weeks, are said to be tentative in nature and the company is understood to be weighing up this level of preliminary interest.

As a result, the company is considering whether to allow the interested parties, well-known life assurance players, access to further financial detail on Irish Life to see if a higher price can be secured from a trade sale.

A spokesman for the company said that it did not comment on market speculation.

Irish Life and Permanent was ordered to raise €4 billion by the Central Bank following the stress tests of the banks last March.

Alan Cook, the chairman of the company, told shareholders at the annual meeting last month that it would require more than €2.5 billion from the State to meet the capital bill after raising an estimated €1.5 billion from selling Irish Life.

Deutsche Bank was appointed last month to advise on the sale.

The company initially said that it would prepare for an IPO of Irish Life Assurance on the day of the stress test results, as it considered this “the most likely sale process to maximise value”.

It has since changed its approach, given the poor market climate for an Irish flotation. Last month Mr Cook would not rule out a trade sale. The company pressed for a flotation initially to avoid a protracted trade sale but such a move is still open if there is interest from potential suitors.

Irish Life and Permanent must offer Irish Life for sale by October under EU-IMF bailout terms.

The group is expected to fall into Government control following the sale of Irish Life, given the scale of capital it requires based on a market value of €25 million.

Credit ratings agency Standard and Poor’s downgraded Irish Life and Permanent’s lower tier two subordinated bonds yesterday, based on the group’s plan to inflict losses of 20 per cent on investors.

The agency deemed the offer to investors a “distressed exchange” as they will receive virtually nothing if they refuse the offer.

The company will write down as much as €840 million of subordinated bonds by offering to buy back debt for 20 cents in the euro under Government plans to share losses with junior bondholders.

The move will leave about 100 Irish credit unions nursing losses of about €20 million.

The credit unions received the Irish Life and Permanent bonds as part of a €35 million compensation package offered by stockbroking firm Davy for earlier losses on perpetual bonds sold by the firm.

The Irish League of Credit Unions said that it was “very disappointed” with the severity of the burden-sharing on the company’s 10-year bond. The league went to “great efforts to explain to the Government how credit unions came to be holders of this bond and that it would be most unfair if they were to face losses on this bond seeing as this bond was meant to shore up losses already suffered”, a spokeswoman said.