Several of the country's leading business figures are nursing losses on their investments in a Dublin finance firm which yesterday said it was writing off at least €70 million in assets due to the global credit crunch.
International Securities Trading Corporation (ISTC), which was set up in 2005 by former Anglo Irish Bank executive Tiarnan O'Mahoney, yesterday suspended trading in its shares, postponed its results and scrapped plans to raise €150 million through a bond issue.
The highly specialised firm, which raises money on international markets to lend to banks, made the decision after writing off at least €70 million on investments totalling €210 million in high-risk financial units called structured investment vehicles (SIVs).
SIVs have been hit particularly badly by turmoil in the financial markets caused by the US subprime mortgage crisis.
These vehicles rely on raising short-term funds to finance long-term investments that offer greater returns.
Mr O'Mahoney said that, as a result, ISTC would post a loss of at least €55 million for the year to September 15th, 2007, compared to a forecast profit of €15 million.
He could not say whether the company would write off more than €70 million. "In the current market environment, we cannot rule that out," he said.
Mr O'Mahoney's previous job as chief operating officer of Anglo Irish Bank brought him into contact with some of Ireland's wealthiest businessmen who agreed to invest in ISTC after he left the bank.
ISTC raised €145 million from investors shortly after it was established and, since then, has closely guarded the identities of its shareholders.
Mr O'Mahoney previously described the share register as "a who's who of Irish business". Shareholders include entrepreneur Seán Quinn, former Anglo Irish Bank chief executive Sean FitzPatrick, businessman Denis O'Brien and property developer Paddy Kelly.
ISTC said in a statement yesterday: "The turmoil experienced in financial markets since July last is unprecedented, and has represented one of the most difficult and challenging market environments experienced by the banking sector over the past 30 years."
Mr O'Mahoney said the firm could survive the current crisis: "We can weather this storm. It will need a lot of work and agreement from our banks."
ISTC will meet its banks this week to negotiate new borrowing terms and to seek alternative funding for the €150 million it had planned to raise in a bond issue. The firm had intended to use this money to protect it against any unforeseen shocks.
ISTC made a profit on the difference between the rates at which it borrowed and lent money.
Although the firm is not controlled by the Financial Regulator, the watchdog is monitoring the exposure of Irish banks to ISTC.
The finance firm has lent money to some of the country's main banks. Two of the largest banks, Anglo Irish Bank and Bank of Ireland, are known to have no exposure to the difficulties at ISTC.
Mr O'Mahoney said the company's SIV assets represented just 7 per cent of its total loan portfolio, which stood at €3 billion.
Most of the company's estimated 250 shareholders are sitting on losses, given that they bought the company's shares above the €100-a-share mark.
ISTC shares traded at €60 in an unofficial market operated by Goodbody Stockbrokers - down from a high of €345 earlier this year - before their suspension yesterday. The company is now valued at about €115 million, down 83 per cent from its peak.
ISTC cancelled a €150 million bond, launched last month, that was underwritten by financier Dermot Desmond.
Investors could participate in the bond and then convert their investments into ISTC shares at €110 a share after five years.
Some shareholders criticised the bond, saying it valued shares at far less than the level at which they had invested.
Mr O'Mahoney said yesterday the bond valued the shares at €155 as it offered a 9 per cent coupon, or dividend.
