US equity giant to take stake in McInerney

US PRIVATE equity giant Oaktree Capital is close to taking a stake in troubled house builder McInerney, which has been wrestling with a €236 million debt since last year.

Bank sources said yesterday that Oaktree, a Los Angeles-based private equity house with $76 billion under management, is said to be looking at investing between €30 million and €40 million in the company in return for a stake.

Bank of Ireland and Anglo Irish Bank, members of a syndicate to which McInerney owes €111 million, are also considering taking a stake in the listed company as part of a restructuring deal.

McInerney has been in talks with its Irish and British banks since last year, when it breached a number of the terms of its loans. It owes a total of €236 million to institutions on both sides of the Irish Sea.

It hired Goldman Sachs as advisers in March to aid it with a restructuring process. At the time the company told investors this could involve issuing new shares in return for fresh capital, which could possibly dilute the interests of its existing shareholders.

Shareholders would have to approve any deal involving the issuing of new shares to either Oaktree or the banks.

The National Asset Management Agency (Nama) would also have the right to approve any deal regarding McInerney’s debts to Bank of Ireland and Anglo Irish.

The agency is due to take ownership of those debts later this year and as a result has the right to approve any changes to their existing terms and conditions.

Over €80 million of the total is due to the two banks, with the balance owing to KBC.

If a deal were done, it is likely that it would have to be within the next two months. McInerney needs to be recapitalised and its working capital is under pressure.

The company recently began work on a number of sites in Ireland and Britain that it mothballed when the countries’ housing markets collapsed.

It has been selling houses in both markets. The company is understood to have sold between 60 and 70 new homes in Ireland so far this year.

McInerney released a statement yesterday morning in response to reports at the weekend that the banks are close to appointing a receiver and that Nama has rejected its rescue plans.

The group said it “is at an advanced stage of negotiations with a leading international equity partner regarding a substantial injection of new capital”, but would not name the investor.

It also pointed out it has had no formal talks with Nama and it has not presented it with any formal recapitalisation proposals.

McInerney added that it is in advanced negotiations with its British banks regarding the restructuring of loans worth €125 million.

Oaktree Capital said yesterday it does not comment publicly on its activities.

McInerney’s business is focused on building and selling new homes mainly to first-time buyers.

The group’s approach is to buy and develop sites close to key urban centres in Ireland and Britain.

It is expected to publish results for the first six months of the year shortly.