Saturday, December 21, 2024

Former Davy owners secure €48m settlement with Bank of Ireland to resolve legal disputes

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A company controlled by former Davy shareholders has secured a €48 million settlement from Bank of Ireland to resolve legal disputes between both sides – and other matters – stemming from the bank’s purchase of the stockbroking firm 2½ years ago, according to sources.

The accord is being seen as a significant victory for Ailmount Investments, which represents about 700 former Davy shareholders, including senior figures who were involved in a controversial bond trade a decade ago that resulted, in 2021, in a Central Bank fine and crisis at the firm.

Shareholders in Ailmount have been advised of the settlement in recent days. A shareholder, speaking on condition of anonymity, said that shareholders are “very happy” with the result.

“The parties have reached a fair and amicable agreement across all post completion matters following the sale of Davy to Bank of Ireland,” a spokesman for the bank said, declining to comment further. A spokesman for Ailmount declined to comment.

Bank of Ireland repurchased Davy in June 2022 – 16 years after the stockbroking and wealth management firm was subject to a management buyout from the bank – for €427 million, some €13 million below the level agreed 11 months earlier.

The deal was driven by efforts to draw a under a crisis that had engulfed Davy in early 2021 when the Central Bank concluded its investigation into the 2014 bond trade.

It was agreed at the time of the sale that a quarter of the consideration would be withheld for two years, subject to certain conditions being met. Most of the amount outstanding was paid during the summer, even as both parties were in dispute over tens of millions of euros.

Ailmount, where major investors included former Davy executives Brian McKiernan, Kyran McLaughlin and Barry Nangle, sued Bank of Ireland in July 2023, claiming the bank had failed to make a payment of €19.7 million due as part of the acquisition.

This reflected a reduction in the capital that Davy was required by regulators to hold after the sale.

Meanwhile, Bank of Ireland filed proceedings against Ailmount in May, threatening to withhold €15.3 million under indemnity clauses in the deal, to cover certain historical legal claims against Davy. A further €15 million outstanding was not in dispute.

The total, including interest and fees, amounted to in excess of €50 million, but has now been settled in full for €48 million, sources said. Shareholders in Ailmount still have to vote on the accord, they added.

Ailmount was represented by the Dublin office of international law firm Dentons, with the team by lead the practice’s head of litigation, Karyn Harty. A&L Goodbody represented the bank.

The Central Bank sent shock waves through Dublin financial circles and beyond in March 2021, when it revealed that it had fined Davy €4.1 million and reprimanded it for breaching market rules by failing to identify whether a conflict of interest existed as 16 staff bought junior bonds in Anglo Irish Bank, in liquidation at the time, from a client, Northern Ireland developer Patrick Kearney, without disclosing that they were the buyers.

The regulator also found that Davy had kept its own compliance officials in the dark on the deal.

Mr Kearney, who initially settled a case with Davy on the matter in 2015, mounted another lawsuit in 2021, after the Central Bank investigation. That case was settled in April 2023.

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