Davy holding company owes 94 million euros to future parent company BoI

As Bank of Ireland prepares to buy Davy, it faces a major lender from a holding company above the brokerage firm: itself.

Accounts filed by Davy’s UK unit J&E Davy (UK) this week offer little information on the financial performance of the brokerage firm and the broader capital markets, which is limitless. The unit’s 11.5 million euros in turnover last year represented just over 6% of the total of 190 million euros reported by the group.

J&E Davy (United Kingdom) became the regulated subsidiary of Davy in the United Kingdom in 2018 as the group prepared for Brexit and, as part of this restructuring, became guarantor of the loans of a group holding company, called Green Note Unlimited.

Notes in the accounts point out that Green Note owed the Bank of Ireland 94 million euros at the end of 2020, up from 100 million euros a year earlier. The loan, dated April 2018, was a rider to a facility agreed in 2013 and bears interest at 2.25%.

It becomes immediately payable and refundable in the event of a change in control of the group, according to the note.

Bond trade scandal

Bank of Ireland agreed in July to buy Davy for an enterprise value of 440 million euros, four months after the company went to market in an attempt to end a swap scandal of bonds.

A spokesperson for Davy declined to comment on how the liability will be handled.

The loans are known to be a legacy of Bank of Ireland which supported Davy’s 2013 buyout of 140 million euros in loans from the liquidator of Irish Bank Resolution Corporation, formerly Anglo Irish Bank.

Anglo had backed a management buyout of Davy from Bank of Ireland in 2006 with around € 300 million in loans. These loans were repaid quickly over the following years, even as the Republic grappled with the financial crisis.

Davy entered the market in March as the company grappled with the fallout from a € 4.1 million Central Bank fine relating to a bond transaction dating back to 2014. Davy was recognized guilty of breaking market rules for failing to identify whether a conflict of interest existed because 16 employees bought Anglo Irish Bank junior bonds from a client in November 2014 without revealing that they were the buyers.

Regulatory approval

Davy has kept his own compliance officials in the dark about the deal.

The deal with the Bank of Ireland in July, which remains subject to regulatory approval, also includes the option to make up to € 40m in additional payments from 2025 to the house’s remaining employees. brokerage, subject to trading performance.

In addition, the bank will pay an additional 125 million euros for the excess liquidity on Davy’s books. Much of that will come from the separate sales of Davy’s fund management and management division and its 63 percent stake in Rize ETF, a UK-based exchange-traded fund firm.

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