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NBI responded to the questions raised by The Currency in this article in February 2022. Click here to read updated information.
The private US investors contracted to deliver the €3 billion taxpayer-subsidised National Broadband Plan (NDP) two years ago had provided just €100 million in funding at the end of 2020, nearly all in the form of short-term debt. High fees and interest on this debt have allowed them to charge half of this amount back to their own companies, an investigation by The Currency can reveal.
Financial data for 2020 across 13 entities in the byzantine holding structure of the two National Broadband Ireland (NBI) companies, tasked with rolling out high-speed connections to 544,000 addresses everywhere in rural Ireland, unveil the financial details of the project for the first time since the contract was signed on November 19, 2019.
The corporate maze of companies, across Ireland, Luxembourg and the US, each contain a piece of the puzzle and it is only by putting them together that the full picture emerges. They reveal who really owns NBI, how it is financed, and where the funds raised in its first year of operation were spent.
Several key features of the business depart significantly from the plans announced by the then Fine Gael government in the months preceding the contract’s signature.
Today and over the next two days, we take a deep dive into the intricate financial links connecting these companies to reveal the real majority owner of this critical piece of national infrastructure; the funding model NBI has adopted to satisfy hungry investors in US hedge funds after last-minute changes to the small print of the state’s largest procurement contract; and what happened once the company first had money to spend.
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Who owns NBI?
The National Broadband Plan contract was signed between then Minister for Communications Richard Bruton and NBI Infrastructure DAC, the Irish company tasked with building and operating the subsidised rural broadband network with its sister NBI Deployment DAC. The minister owns a golden share ensuring oversight in each of the two companies, but their substantial equity is owned by their common parent Metallah Ltd, itself a subsidiary of Granahan McCourt Dublin Ltd.
Granahan McCourt is the name of the US business run by Irish-American telecommunications tycoon David McCourt, who is the chairman of NBI companies. With Tetrad Corporation, the family office of McCourt’s long-time business partner Walter Scott, they had secured preferred bidder status for the National Broadband Plan through a different company, Granahan McCourt Dublin (Ireland) Ltd, which they are now winding up.
To sign the contract, however, they formed the slightly different-named Granahan McCourt Dublin Ltd in October 2019. Its shareholders were named only on the day before the historic signature, on November 18, 2019. They were (and remain) Granahan McCourt Fund Ltd, with a 51 per cent stake, and TEL-IE Broadband SARL, a Luxembourg vehicle of the US investment firm Oak Hill Advisors (OHA), with 49 per cent.
Throughout the process, McCourt has been the project’s frontman and the immediate shareholding structure of NBI companies suggested that OHA was merely his minority partner – until now.
Based on information now filed by TEL-IE Broadband in Luxembourg and seven further intermediary holding companies in Ireland, The Currency has consolidated the ultimate interests of all investors in the project. Although the branch of the tree ultimately controlled by Granahan McCourt Capital owns a majority shareholding at each junction of the ownership structure, allowing NBI companies to declare it as their ultimate parent, such dilution occurs along the way that McCourt’s firm owns in fact just 10 per cent of NBI.
Oak Hill Advisors emerges as the largest investor. Not only does its subsidiary TEL-IE Broadband own 49 per cent of NBI’s equity, but it has in fact extended 54 per cent of all the funding provided by shareholders across debt and equity. Intercompany debt information detailed below also identifies Telecom Infra Mgmt LLC, a separate US company with a 5 per cent ultimate shareholding in NBI, as another vehicle for OHA’s investment. This suggests OHA’s overall interest to be a majority of 54 per cent, which NBI denies, insisting it is less than 50 per cent.
There will soon be another branch to add to the OHA branch of NBI’s gnarled ownership tree. T Rowe Price, a Nasdaq-listed investment firm with $1.6 trillion in assets under management, agreed to acquire Oak Hill Advisors at the end of October.
Why Telecom Infra Mgmt can only be a vehicle for OHA
In addition to their initial share purchases, all investors in NBI have lent funds to the business. This will be detailed in Part 2 of this series. Accounts for intermediate holding companies show that each shareholder has made loans in exact proportion to its equity holding – with only one reporting no such debt information: Telecom Infra Mgmt LLC.
However, Oak Hill Advisors’ vehicle TEL-IE Broadband has reported that it initially provided shareholders’ loans representing 54 per cent of the total advanced to NBI. TEL-IE Broadband then “transferred” a portion of this debt worth €4.6 million to an unidentified beneficiary, bringing its loan to NBI back in line with its equity share of 49 per cent.
In summary, OHA’s vehicle participated in shareholder loans to NBI and gave a 5 per cent tranche of them away; meanwhile, Telecom Infra Mgmt, a secretive company with a 5 per cent interest in NBI, is the only shareholder that has not disclosed the loans it made to NBI; and a 5 per cent tranche of shareholders’ loans to NBI is not claimed by any other shareholder. It, therefore, appears that Telecom Infra Mgmt obtained the loans transferred by TEL-IE Broadband, identifying it as another vehicle for OHA.
A spokesman for NBI maintained that “Oakhill holds less than 50 per cent interest in NBI” but did not provide an alternative explanation for the role of Telecom Infra Mgmt.
Telecom Infra Mgmt is registered in the US state of Delaware and no information is published concerning its ownership and control. The Currency has ordered an annual report for Telecom Infra Mgmt LLC from the Delaware Division of Corporations, which is available only by post after payment through a website prone to crashing that did not provide a final confirmation of the document order.
The Currency sent questions to OHA on the structure of its investment in NBI on Monday morning and had not received a reply at the time of publication. If we receive any additional information from the Delaware Division of Corporations, OHA or other sources contacted for this story, we will publish it in a follow-up article.
Note: After publication of this article, a spokesperson for the Department of Communications, citing information from NBI, told The Currency that Telecom Infra Mgmt was not an investment vehicle for OHA and was jointly owned by Tetrad Corporation and Granahan McCourt Capital LLC. They did not deny that it was the holder of debt funding originated by OHA.
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Aside from OHA, another US investor has been keeping a low profile. NBI director Hamid Akhavan-Malayeri represents a 25 per cent ultimate shareholding held in trust by a Dublin subsidiary of the Maples Group corporate law firm. An intermediary holding company reports: “Hamid Akhavan-Malayeri holds an indirect interest in the company through his indirect shareholding in an investor entity in the company”. This is the only identification available for the second-largest investor in the biggest procurement contract in the history of the state.
This investor entity may be Twin Point Capital, a US investment fund where Akhavan-Malayeri is a partner, according to his LinkedIn profile and his bio from several technology companies where he currently serves as director. His past career encompasses senior executive roles at Deutsche Telekom. Twin Point Capital, however, does not list him among its owners and executives disclosed to the US Securities and Exchange Commission.
Twin Point Capital was formed in 2015 by former staff of Oak Hill Capital, a third New York firm from which Oak Hill Advisors was spun out in 1998 to focus on credit deals. There have been multiple instances of revolving doors between the three firms’ teams. At the end of 2020, Twin Point Capital reported $311 million in assets under management targeted to investments in the broadband industry.
NBI declined to identify the investors associated with Akhavan-Malayeri when asked by The Currency and did not answer a question on any potential connections between them and OHA. The Currency sent questions to Akhavan-Malayeri and Twin Point Capital on their involvement with NBI early on Monday morning and had not received a reply at the time of publication.
The third investor in NBI is Tetrad Corporation, the family office of Walter Scott, who died in September. Scott started his career as an executive in the construction industry and became a billionaire co-investing with Warren Buffet in energy before making his own deals, including alongside David McCourt in Ireland’s E-net in the past.
E-net holds a separate state contract to manage wholesale broadband networks in urban areas. Tetrad and Granahan McCourt are no longer investors in it.
Unlike Oak Hill Advisors and Akhavan-Malayeri, Tetrad was always publicly acknowledged as a participant in the bid for the National Broadband Plan and now holds an 11 per cent interest in NBI.
“The funding is not attributed to individual members of the consortium.”
Minister of State Ossian Smyth
This completes the picture of a shareholding structure where McCourt, despite his public role at the helm of the investors’ group backing NBI, is in fact dependent on much stronger partners to make strategic decisions. Asked which of its investors NBI recognised as having a controlling interest in the business, the company spokesman replied: “The investors’ investment in the Project is structured through tiered holding companies, each of which is controlled by Granahan McCourt Capital LLC.”
Last month, Social Democrat TD Catherine Murphy asked the Minister for Communications “if he will provide in percentage terms, in the context of the national broadband plan, the capital each member of the consortium was putting up”. Murphy told The Currency the group of investors that ended up being the sole bidder for the contract was never clear. “Aside from Granahan McCourt, it changed several times and was impossible to track,” she said.
Minister of State with responsibility for Public Procurement and eGovernment Ossian Smyth said in reply to her latest parliamentary question:
“Total funds committed to the Project from Metallah Ltd Equate to €223m. This committed funding by Metallah Ltd is in the form of shareholder loans to NBI and equity provided to NBI. The funding is not attributed to individual members of the consortium.”
The information compiled by The Currency from NBI company filings, however, now provides the percentage Murphy was looking for.
McCourt may sit in the chair at board meetings for the business’s cascade of holding companies and cast a deciding vote thanks to his formal majority stake in each of them. But when it comes to controlling the purse’s strings, with 54 per cent of the funding reported to date, Oak Hill Advisors is calling the shots.
And the US investment firm is anything but a long-term investor in big infrastructure. OHA describes its business in regulatory literature as “specializing in leveraged loans, high yield bonds, private credit, distressed investments and collateralized loan obligations”, while also engaging in other investments including equity.
A large part of its business is that of a vulture fund, buying discounted bad loans to sweat the borrowers or their underlying assets for cash. Another part is to issue credit at high interest in risky “special situations” where traditional lenders wouldn’t go.
Three-quarters of the money OHA is investing in NBI comes from its Strategic Credit Fund II, a hedge fund that raised over $2 billion from 200 international investors in 2016, according to its filings in the US. OHA itself put up 3 per cent of the Strategic Credit Fund’s capital. This fund mirrors OHA’s overall business, focusing on distressed corporate debt with the flexibility to do secondary deals on other assets, the Wall Street Journal reported at the time.
One business OHA and its investment funds clearly aren’t involved in is owning public infrastructure for the duration of a 25-year state contract.
The Currency sent questions early on Monday morning to the Department of Communications and Richard Bruton on the ownership of NBI. A Department spokesperson said it may take several days to respond. Bruton had not responded at the time of publication.
