After The Currency exposed the financial information emerging from National Broadband Ireland (NBI) companies last week, it was the turn of politicians to ask questions of the government this week in light of our reporting and that of the Business Post.

Sinn Féin TD Ruairí Ó Murchú secured the most direct opportunity to raise the issues we covered regarding NBI’s capital structure, short-term debt funding and high fees and interest bills in favour of its investors with Minister for State for Public Procurement and eGovernment Ossian Smyth in the Dáil chamber on Tuesday night. Smyth first responded with the following information: 

“On the matter of ownership, Metallah Limited is the 100 per cent owner of the shares in the capital of National Broadband Ireland, save for the special share of the Minister, which does not provide ownership rights. Granahan McCourt Dublin Limited is the 100 per cent owner of the shares in the capital of Metallah Limited and is owned 50.9 per cent by Granahan McCourt Fund Limited, a David McCourt-controlled company, and 49.1 per cent by Tel-IE Broadband SAR[L], an entity managed and controlled by Oak Hill Advisors. The ownership structure remains as it was at the signing of the contract.

“The investors are providing funding through the purchase of shares in National Broadband Ireland and the provision of shareholder loans. I am advised that utilising both instruments is a standard form of investment in infrastructure companies and that the reference to both as ‘equity investments’ is common practice.

“The initial drawdown of committed shareholder funds by National Broadband Ireland was €100 million in January 2020. This was drawn down before the release of any subsidy by the State. I am advised that no shareholder distributions have been made to date. I am also advised that a further drawdown of investor funds of €20 million will be made in the coming weeks and that the full amount of committed equity, €175 million, is covered by guarantees.”

Under rapid-fire further questioning from Ó Murchú, Smyth added in relation to the first article in the series published by The Currency last week:

“One of the stories that appeared last week had the headline, ‘How a hedge fund quietly took over the National Broadband Plan’. The next day, 8 December, Deputy Mary Lou McDonald said in the Dáil that the majority shareholder of the consortium, National Broadband Ireland, is Oak Hill Advisors. Neither of those statements is true. A hedge fund has not quietly taken over the national broadband plan, although I was worried when I read the headline. Naturally, I went to the corporate lawyers and corporate accountants and asked whether there was any truth to the story. As it turns out, the majority share ownership continues as it was on the date of the signing of the contract. The ownership has not changed. If the ownership had changed, it would have required the consent of the Minister. It is not that there is a mistake in the story or some kind of error; it is that the whole thrust of the story, the headline, and repeated elements throughout to the effect that there had been a secret takeover by a hedge fund is simply untrue.”

The minister’s choice of the “secret” word was his, not The Currency’s. As we reported, the information that Oak Hill Advisors provided the majority of NBI’s initial funding is not secret, it was reported by the US hedge fund management firm’s holding company TEL-IE Broadband SARL in accounts filed in Luxembourg.

Extract from 2020 accounts filed by TEL-IE Broadband SARL in Luxembourg.

After purchasing nearly €1 million worth of shares and lending €52.6 million through holding companies for NBI, totalling 54 per cent of the funds invested in the project to date, TEL-IE Broadband then reported the “transfer” of a €4.6 million loan tranche to a beneficiary identified by The Currency as Telecom Infra Mgmt LLC, a company registered in the US state of Delaware for which no financial information was available. (Description of the lack of information about Telecom Infra Mgmt was the only occurrence of the word “secretive” in The Currency.)

After we published those details, the Department of Communications, citing information from NBI, told The Currency that Telecom Infra Mgmt LLC was owned jointly by Granahan McCourt and Tetrad Corporation. There is no reason to doubt this, nor is there documentary evidence of it, or how it might have evolved in the past two years. The largest NBI asset traceable to Telecom Infra Mgmt to date, however, remains a portion of loans originated by Oak Hill Advisors through TEL-IE Broadband. None of NBI, Oak Hill Advisors or the Department have yet replied to The Currency’s questions regarding the reasons for this convoluted financing transaction.

Based on the breakdown of NBI’s funding between shareholders and loan originators, The Currency reported that “this suggests OHA’s overall interest to be a majority of 54 per cent” in NBI – not that OHA owned an ultimate majority of NBI’s shares. As this debt issuance and the subsequent transfer of a portion of TEL-IE Broadband’s loan funding were reported in Luxembourg but not explained anywhere nor reflected in the filings of NBI companies in Ireland, we concluded that the transaction had happened “quietly”, which remains a fair description.

The small, 5 per cent interest lodged in Telecom Infra Mgmt has the potential to transform a minority interest into a majority. Despite the difficulty in obtaining information on this aspect of NBI’s funding, Smyth has now confirmed there was no “mistake” or “error” in our reporting of it.

When does debt become equity?

Meanwhile, Smyth said that it is “common practice” to describe the shareholders’ loans advanced to NBI as “equity investments”. This is true only if the loans come with options to convert the debt to shares. Repeated questions on this point from The Currency to the Department, NBI and its investors remain unanswered.

If the debt is convertible, which is not reported in company accounts, it is difficult to understand why none of the participants in NBI would acknowledge it. If this was the case, it could be qualified as equity and would also come with a form of control over NBI. In this case, the period after Oak Hill Advisors’s subsidiary TEL-IE Broadband advanced the majority of loans and before it transferred a portion of them away would have triggered a change of control in NBI.

If the debt is not convertible, then it cannot be described as equity. It remains unclear which is correct.

In reply to further written questions from Social Democrats co-leader Catherine Murphy and Sinn Féin TDs Eoin Ó Broin, Mairéad Farrell and Sorca Clarke, Smyth repeated the position that “Metallah Limited is the 100 per cent owner of the shares in the capital of NBI – save for the special share of the Minister which does not provide ownership rights. Granahan McCourt Dublin Limited is the 100 per cent owner of the shares in the capital of Metallah Limited and is owned 50.9 per cent by Granahan McCourt Fund Limited (a David McCourt controlled company) and 49.1 per cent by Tel-IE Broadband SAR[L], an entity managed and controlled by Oak Hill Advisors”.

Scrutiny at this level of NBI’s holding structure, however, is insufficient to establish or monitor its ultimate ownership. As we reported last week, Granahan McCourt Dublin Ltd is just the lower branch of a complex tree in which David McCourt retains nominal control through a majority position at each nexus. His interest, however, becomes so diluted along the way that The Currency has revealed his ultimate ownership through Granahan McCourt Capital LLC to be just under 10 per cent.

Click image to download full-size map.

To date, NBI, the Department of Communications and its ministers have declined to answer questions from The Currency and from TDs on the percentage breakdown of NBI’s ownership or to reveal the identity of a 25 per cent ultimate shareholder represented by NBI director Hamid Akhavan-Malayeri.

Following further questioning by TDs, we have also heard from Smyth this week that:

  • The number of premises where NBI’s broadband service was available in the first week of December was 27,000, of which 3,900 had subscribed to it. Availability by the end of this year will now reach approximately 35,000 premises, down from an initial target of 115,000 that was reduced to 60,000 in September. New 2022 targets in line with a remediation plan are to be agreed in the new year.
  • “The NBP Contract provides specific protections in relation to a change in ownership, sale, or change in control of shareholders of NBI. Under the Contract, and up until 12 months after the network build is complete, the prior approval of the Minister is required for any of these events. In the event of a sale of NBI, any new owners will continue to have the same obligations as the original owners.
    “The Contract also requires the written consent of the Minister prior to the transfer of any interest, direct or indirect, in NBI held by Mr David McCourt. Again, this requirement is in place until 12 months after the network build is complete. It should be noted, however, that approval under these provisions cannot be unreasonably withheld.
    “In the event that the investors sell the majority of their shareholding in NBI in the first ten years of the Contract, the State will be entitled to clawback a proportion of any profit on sale based on the value of the business at the time of sale.”
  • Smyth has asked his officials how much more of the National Broadband Plan contract can be published. He referred to Section 36 of the Freedom of Information Act, which excludes commercially sensitive information from public release. This was used to redact entire sections out of the contract when it was first published last year. The Currency has sent the Department of Communications a Freedom of Information request for a full, unredacted copy of the contract under provisions of the same legislation ensuring that information is released when public interest outweighs commercial sensitivity.

Further reading

14 questions for TDs to ask the government about the National Broadband Plan