Goldman considers investment to rescue ISTC

By John Murray Brown in Dublin

Published: December 1 2007 02:00 | Last updated: December 1 2007 02:00

Goldman Sachs is considering an investment in International Securities Trading Corporation, the troubled Irish lender forced into interim examinership this week after one of its banks demanded part repayment of its loans.

According to bankers familiar with the negotiations, the US investment bank has been approached to consider a rescue operation, as have a number of other financial institutions such as Silverpoint Capital and Avenue Capital, two hedge funds.

Officials say it is a reflection of the important role that ISTC played in providing capital to a wide number of financial institutions that international bankers are now ready to consider a rescue.

"This is more than a story about a few Irish investors who lost a load of money," said one advisor.

The Irish investor list is described as Who's Who of Dublin's business elite and includes Denis O'Brien, the telecommunications entrepreneur, and Sean Quinn, the Fermanagh-based business who is reputedly Ireland's richest man.

The group includes a large number of Irish builders and developers.

But it also includes international figures such as Sir Peter Sutherland, the former Irish European Union commissioner and Goldman Sachs International chairman.

The crisis was triggered three weeks ago when Moody's downgraded about €210m (£150m) worth of structured investment vehicle assets, forcing ISTC to announce that it would take a €70m charge.

This downgrading of its debt scuppered plans to raise liquidity via a convertible bond issue, which Dermot Desmond, the financier, had agreed to finance.

Dresdner Bank, one of ISTC's 30-odd lenders, then demanded repayment on a €176,250 debt, which the Irish company was unable to meet, forcing it to seek the protection of the Irish courts.

In its petition to the courts, ISTC estimated the loss to the company of a forced liquidation would be €871m.

The company raised €165m in equity when it launched in March 2005. It also has €280m of subordinated debt issued as notes, which is held by a range of international financial institutions. In addition, it has €155m of unsecured debt. On top of that the banks lent about €2.7bn. The creditor group includes Merrill Lynch, Morgan Stanley, Deutsche Bank, and Citigroup.


Tiarnon O'Mahoney, ISTC chief executive, estimated some banks could lose as much as €100m.