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Wilbur Ross

New York billionaire’s vote of confidence in Ireland’s economic recovery

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Wilbur Ross

New York-based billionaire Wilbur Ross has revealed why Ireland’s attempts to recover from the recession are attracting outside investment.

Ross believes a growing number of outside investors are reacting favorably to Irish efforts to rebuild an economy crippled by the post Celtic Tiger property collapse.

The American visitor, known for restructuring and rescuing failed companies, has just put his money where his mouth is with a $430million investment in Bank of Ireland.

His decision to join Canadian firm Fairfax Financial and California’s Capital Group in a $1.6 billion investment in Bank of Ireland represents the first significant foreign investment in Ireland’s banking sector since it collapsed in 2008.

Speaking to the Reuters news agency, Ross has revealed that the deal was fueled by positive news on an Irish recovery led by the government’s announcement that it is ahead of target to bring its budget deficit under control.

The lack of public protest against a harsh austerity program and the reduction in the interest rate charged on the EU-IMF bail-out have also prompted Ross’s confidence in Ireland.

“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.

“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.”

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Breathing space for Irish economy

Ross sees Ireland as a different proposition to Greece and Portugal who are both struggling to cope with the terms of their international bail-out packages.

He added: “I am genuinely impressed and have been for some time at the way Ireland bit the bullet and faced up to it.

“Unlike the Club Med economies, the former government and the present one have dealt very surgically and very quickly with the problem.”
The Euro zone deal and confirmation that Ireland is virtually guaranteed funding through 2013 was also a factor in his huge investment and vote of confidence.

“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,” said Ross.

“There is no other country in Europe that can say they have that.”
The entrepreneur also believes that Bank of Ireland can eventually return to profit and offer him a return on his investment.

“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.

In control of a $10 billion investment pot, Ross specializes in consolidating out-of-favor assets in areas such as autos, steel and coal and has recently invested in small, regional U.S. banks.

Under the deal brokered by the Irish government, his New York based buyout firm WL Ross & Co will take a 9.9 percent stake in Bank of Ireland.

Ross also told Reuters that the 10 cents per share he paid was far below his estimate of the bank’s book value of around 26 cents per share, giving a buffer against future losses.

The new investors will hold 35 percent of Bank of Ireland compared to the state’s stake of 15 percent.

“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.”
 

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