Capital in talks to fund EBS

TOP-level talks that could determine the future direction of EBS Building Society and Cardinal Capital Group – led by Irishmen Nick Corcoran and Nigel McDermott – are talking place.

EBS boss Fergus Murphy said a private equity deal could fully or partially take the place of capital that might be provided by the state.

Mr Murphy, who was attending a financial conference in Dublin, said any deal could see new investors becoming substantial shareholders in EBS.

He stressed the talks were at “an early stage” and the banking environment was changing rapidly.

In November 2008 Cardinal headed the Mallabraca consortium, which included a number of private equity firms that claimed to have €5bn it was prepared to invest in Bank of Ireland. At the time it was speculated the internationally based consortium might take a 60% stake in the troubled Irish bank, but the moves came to nothing.

If a deal with EBS proceeds it could reduce or replace the need for re-capitalisation funds from the state.

Talks on merging EBS and Irish Nationwide into a third banking force, which the Government said it would like to see happen, have stalled.

Both organisations have been asked to submit restructuring plans to the European Commission.

EBS needs €875m of new capital to bring its ratios into line with new international standards.

Earlier this week the INBS reported losses of €2.6bn and the results were so bad that closure of the business is now seen as a distinct possibility.

EBS and Nationwide have been asked to submit restructuring plans to the European Commission which would, among other things, outline how much funding they need from the state to be financially secure. Given the background of the suitors, and the stressed state of INBS, a deal with Capital could offer different possibilities to the EBS.

Sources said it was too early to say how the talks will pan out.