February 1, 2019 / 2:58 PM / 22 days ago

Irish sovereign wealth fund to help Brexit-hit companies

DUBLIN (Reuters) - Ireland’s sovereign wealth fund will offer long-term capital to firms significantly exposed to Britain to diversify products or markets if Brexit adversely impacts their businesses, the fund said on Friday.

FILE PHOTO: A sea bird perches on a bridge in the financial district of Dublin, Ireland October 18, 2018. REUTERS/Clodagh Kilcoyne/File Photo

With close trading links with Britain, especially in labour intensive sectors like agri-food, Ireland’s export-led economy is considered the most vulnerable of the remaining 27 European Union members to a disruptive exit by its neighbour.

The government has alerted the European Commission that it will seek emergency aid for companies if Britain leaves the EU without a deal next month, alongside other potential emergency EU aid and domestic funding.

The Ireland Strategic Investment Fund (ISIF) will seek to fill a potential gap beyond those initial stresses as part of its move from a broad investment strategy to government priority areas such as housing, regional development and Brexit.

“We’re not going to solve their wage bill in April or anything like that... This will be complimentary to short-term supports that other government might provide to get from here to there,” ISIF Director Eugene O’Callaghan told a news conference.

“This is all dependent on the Brexit outcome. There might be nothing there if there is no Brexit but on the other extreme, a hard Brexit, we will then begin to gear up. The size of the opportunity is utterly dependent on the nature of the Brexit.”

With a remaining pot of 5.4 billion euros (£4.7 billion) and cash coming in from its investments since the fund was set up in 2014, ISIF estimates that it will have 500 million euros available per year for the next five years to invest across the priority areas.

As it typically acts as a co-investor, this would leverage between 1 to 1.5 billion euros of capital from elsewhere, according to O’Callaghan.

For a Brexit-hit firm, ISIF would invest via equity or debt. Equity capital could allow a firm to invest in new markets that would take off in 3, 5 or 10 years while remaining cash flow negative but not burdened by additional debt, O’Callaghan said.

The capital will also likely be made available to firms through a platform or fund that other investors would add to alongside ISIF, he added.

Reporting by Padraic Halpin; Editing by Janet Lawrence

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