AN INVESTOR in the private equity consortium bidding for EBS building society – one of two final bidders for the lender – says that debt forgiveness for its borrowers would only be considered in limited cases or not at all.

Billionaire investor Wilbur Ross, who is part of the consortium led by Dublin-based Cardinal Capital Group, said he was still optimistic about EBS and Ireland, despite fears of a further wave of mortgage losses and the debt crisis.

The Cardinal consortium, which is vying with Irish Life and Permanent for EBS in the final round of bids, is carrying out further due diligence on the lender to ascertain the scale of the potential losses.

“The last due diligence was some months ago so we don’t have a fully formed view right now in any event. Even when we looked at it before we had always anticipated more losses than had ended up,” said Mr Ross.

He declined to say what scale of losses the consortium had considered in its bid.

It is understood that Cardinal estimated losses of up to 7 per cent of the lender’s mortgages under a worst-case scenario in its last bid. This exceeds the 5 per cent estimated by the Financial Regulator for its worst-case scenario.

The other members of the consortium bidding for EBS are US private equity group Carlyle and Cardinal, which is owned by Dublin businessmen Nigel McDermott and Nick Corcoran.

Mr Ross said his company, New York-based WL Ross & Co, has examined debt forgiveness and forbearance measures for mortgage borrowers at banks it has acquired in Florida and Michigan and that this was also a tricky issue at EBS.

“It is a difficult subject and we think that it is the kind of thing that has to be done case by case and very sparingly, if at all,” he said.

“There is no silver bullet to slay the mortgage delinquency dragon – you have got to do it individual by individual because no two individuals are exactly the same.”

Jim Lockhart, vice-chairman of WL Ross, said the US government has looked at the possibility of banks not seeking interest on part of the mortgages until they matured or the house was sold but this option was “full of moral hazard”.

“There are some very deserving cases out there but there is the potential for people to stop paying mortgages so it has to be done carefully,” he said.

The Government’s debt problems were “more the perception of things than reality”, said Mr Ross, and that borrowing costs soaring towards 9 per cent was due to low levels of trading in Government bonds and the absence of buyers.

“To try to cast the fate of a whole country based on a few million bonds trading doesn’t strike me as a very sound thing,” he said.

Market reaction was troublesome, said Mr Ross, but it “shouldn’t be all that shocking” and it did not change the need to fix the Irish banks.