Bank of Ireland has formally withheld about €15 million from the purchase of Davy Stockbrokers that it had been expected to pay to the former owners of the nation’s biggest securities firm.
The bank is understood to have paid more than €75 million to Ailmount Investments, the vehicle used by the former shareholders of the securities firm, which it bought two years ago after the broker was stricken by a scandal involving a bond sale. Payment of about a quarter of the sale price had been deferred until this month.
The bank “paid to Ailmount a significant proportion of the deferred consideration, based on the number of agreed criteria met at this point” on Friday, a Bank of Ireland spokesman said in an emailed response to questions.
Under the terms of the 2022 sale, the bank was due to pay about €107 million to Ailmount in June this year. Last week it emerged that the lender had taken legal action against Ailmount and was threatening to withhold about €15 million of that payment. It is understood that of the €107 million, more than €10 million has been accounted for by technical issues which are not disputed by either side. The bank has paid the bulk of the outstanding balance, but has followed through on its threat to withhold the €15 million.
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The bank is claiming it is entitled to do so under indemnity clauses included in the original sale terms. It is withholding the money to cover against historical legal claims against Davy, The Irish Times reported on May 29th.
This is the second set of legal proceedings between the two sides. Ailmount, whose shareholders include former Davy chief executive Brian McKiernan, launched a commercial court action against the bank in July over its alleged failure to make a payment tied to the bank’s takeover of the broker.
Bank of Ireland bought Davy for about €427 million, including the deferred €107 million. Close to 60 per cent of the amount was due to people who are no longer employees of Davy, based on figures contained in Bank of Ireland’s 2022 annual report.
Davy was put up for sale in 2021 after it was fined a record €4.13 million by the Central Bank for breaching market rules. The broker had sold a Davy client’s bonds to a consortium of 16 people who happened to work for Davy, without notifying the compliance team. The scandal saw the broker dropped as a primary dealer in Irish Government bonds, triggering the closure of its bond desk.
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