The Irish Independent reports that one of the country's most iconic department stores could be sold for as little as €1 as part of efforts to restructure its crippling debts, the Irish Independent has learned.

Anglo Irish Bank and Ulster Bank -- Arnotts' effective new owners, who are owed €300m by the retailer -- agreed earlier this year they could buy out all the shares in the landmark store for a nominal sum, believed to be as little as €1. This would wipe out the shareholding of senior counsel Richard Nesbitt and his family, as well as funding partner Boundary Capital -- led by financier Niall McFadden. The shareholding remains intact for now, sources close to Arnotts said last night.

However, this could all change next month pending EU approval for the lenders to take "joint control" of Arnotts. Once the nominal payment is made, the banks are then free to rebuild the company with a view to selling it on to recoup their debts.

Arnotts, badly hit by the recession, owes nationalised Anglo Irish Bank over €150m, while Ulster Bank, which is not covered by the 2008 banking guarantee, holds the remainder of the company's debt.

Arnotts attempted to assure its almost 1,000 workers yesterday their jobs are "secure".

As first reported in yesterday's Irish Independent, the two banks have notified the EU they plan to take control of Arnotts.

Arnotts executive and board members yesterday discussed the troubled store's future in a series of high-level meetings. Many of them may not survive a series of changes planned by the banks and their advisers.

Radical changes to the board and management of Arnotts are imminent as the shop is told by the banks to simply concentrate on retailing, not property development.

As part of the corporate review, Arnotts has been told that its ambitious plans for a €750m 'Northern Quarter' may now have to be abandoned, even though officially it is due to go ahead in 2011.

The long-term plan of the two banks is to rebuild the retailer and restore its profits and ultimately sell it off to an international trade buyer.

The banks have installed American private equity firm Paladin Capital, who are now calling the shots at the company, leading to tensions among executives and board members.

Arnotts last night refused to comment on the banks' options. However, sources said the shareholding could change immediately pending EU approval.

Anglo has sought permission from the EU to advance the move under European rules. A deadline of August 9 has been set for any objections to the takeover.

If approved by the EU, state-owned Anglo -- which failed in its bid to inject up to €750m of capital into the beleaguered Quinn Group -- would consolidate more than 50pc of Arnotts' mammoth debts on to its loan book.

RESTRUCTURE

Arnotts Holdings Ltd yesterday confirmed it is working with Anglo and Ulster Bank as part of the ongoing process to restructure the group's financing.

"Arnotts strongly emphasises that trading continues as normal," said a spokesperson for the group.

"Arnotts is performing very strongly, with trading for the first half of the year ahead of the market. Jobs within Arnotts remain secure and Arnotts continues to invest in the future of the store. We would like to reassure our customers that it is business as usual at Arnotts."

Arnotts employs more than 900 staff at its landmark store on Henry Street in Dublin and under 100 between its subsidiary, Boyers and Co, on Talbot Street, and another outlet in Stillorgan.

Labour TD for Dublin Central Joe Costello called for a business plan to secure the future of the store, its workers and nearby businesses.

"Anglo, which is now owned by the State, must resist the temptation to offload Arnotts at a fire-sale price just to make some short-term gain," he said.

"Arnotts has been an integral part of the retail landscape in the capital since 1843 and it would be unthinkable if this development led to a situation where the future of the store itself was in question."

The Irish Independent also reports that One51 chief executive Philip Lynch appears to have seen off an attempt by rebel investors to secure seats on the company's board at the company's annual general meeting.

But Mr Lynch, who hinted he would be prepared to step back from his role once part of the group is floated in 2012, was forced to admit that he received a bonus last year as part of his overall €1.4m pay packet.

One51 posted a loss of €11m last year after racking up €28.5m in exceptional charges related to a major non-cash writedown in its stake in ferry operator Irish Continental.

The revelation angered shareholders, who have seen the value of their investment plummet in recent years. Mr Lynch said his remuneration is under review.

Dissident shareholders, led by Gerry Killen, tabled a range of questions in advance of yesterday's packed AGM, querying the group's investment strategy, financial structures used to make tax-free payments to executives and demanding to know how much Mr Lynch was paid.

Mr Killen denied after the AGM that his revolt had been misjudged and ill-timed. "We're not unhappy. But we still want answers to some questions."

Amid a mire of legal argument, shareholders were not permitted to vote directly on the proposed election of Mr Killen and two other rebel nominees to the board, Alf Smiddy and Peter Brennan.

Speaking after the marathon three-hour AGM in the Shelbourne Hotel in Dublin yesterday, Mr Killen said that he would engage with his solicitors to see if legal action should be taken in light of the manner in which the vote to elect directors took place. He also said he had not yet decided whether to call an extraordinary general meeting of One51 in an attempt to seek further clarification on a number of matters.

"We will have to look at our options," he said.

The Irish Times reports that the extent of the Financial Regulator’s involvement in Seán Quinn’s purchase of almost 15 per cent of Anglo Irish Bank has emerged in a confidential letter seen by the newspaper. 

The prudential director at the regulator, Con Horan, signed off on a €169 million loan from Anglo to the Quinn Group to fund the purchase of the bank’s shares in July 2008.

It was unclear until now if the regulator or who within the regulator’s office had approved the bank’s loans to Quinn to buy shares in the bank.

Under company law, a business is prohibited from lending to an individual to buy shares in that company, but certain exceptions are permitted.

Mr Horan stepped down as prudential director at the regulator as part of the restructuring of the Central Bank in the aftermath of the banking crisis. He took over as special adviser to the new head of regulation, Matthew Elderfield, moving to the role created at the reformed Central Bank in December 2009.

The letter shows how Mr Horan told Anglo that the bank should adjust its capital levels to take account of the €169 million loan.

Mr Horan, who at the time of the share purchase reported directly to former head of regulation Pat Neary, forced Anglo to deduct the same sum from its capital reserves in an attempt to encourage the bank to refinance the debt with another lender.

The €169 million loan remains part of the €2.8 billion debt still owing by the Quinn family to the now State-owned bank.

Anglo’s loan was provided to the group founded by Mr Quinn as part of the unwinding of his family’s indirect investment in Anglo, which rose to 28 per cent at its peak, into a direct shareholding of almost 15 per cent in the bank.

Mr Horan wrote to Anglo’s then chief financial officer Matt Moran on July 25th, 2008, saying that the regulator felt the bank should take a deduction from the bank’s “total own funds” – shareholders’ funds held to maintain a bank’s solvency – for the full €169 million loan.

“I refer to our recent telephone conversations and ongoing communication in relation to the exposure of the Quinn Group (Quinn),” wrote Mr Horan in the letter marked “strictly private and confidential”. “Specifically, I refer to the recent loan by Anglo to Quinn for an amount of €169 million to finance his holding in Anglo shares.”

He told Mr Moran that, as discussed, the regulator “considers it appropriate that Anglo take a deduction from Total Own Funds for the full amount of €169 million for solvency purposes until such time as this facility is refinanced”.

“It is noted that it is expected to take between two to three weeks before the requisite structures are in place to facilitate the refinancing of this amount,” Mr Horan wrote.

Last night a spokeswoman for the Financial Regulator said she could not comment as the matter was the subject of a criminal investigation.

The Quinn Group also declined to comment.

The Quinn family lost €3 billion primarily on its investment in Anglo but also on other shares.

The bank took security over the family’s shares in the Quinn Group in return for loans to buy stock.

The family bought the 15 per cent stake after unwinding their interest in Anglo through contracts for difference (CFDs), a high-risk investment that allows individuals take an interest in a firm through borrowings and without declaring it publicly.

The purchase of the stake was announced in mid-July 2008 and completed the following month.

Some 10 per cent of the family’s remaining indirect interest was sold to 10 Anglo customers in a deal managed by Anglo and financed by the bank to support the Anglo share price at a time of market volatility.

This “share support scheme” is being investigated by the Garda Bureau of Fraud Investigation and the Director of Corporate Enforcement Paul Appleby.

Anglo had put pressure on Mr Quinn to unwind his indirect interest as institutions providing the CFDs had loaned the underlying shares to short-sellers – investors who profit from falling share prices – who were betting against the bank.

The Irish Times also reports that the splinter groups of One51 shareholders took it in turns to applaud their guy.

Later in the investment group’s three-hour agm in the Shelbourne Hotel, there would be dark mutterings about investigations and blackmail and “the long grass”.

But for starters, One51 founder Philip Lynch opted for the more standard Powerpoint defence.

Displaying a chart showing what rebel shareholder Gerry Killen calls “a ragbag of disparate businesses”, Lynch professed himself satisfied with his own performance, “bearing in mind that 2009 wasn’t a good year for anyone, as you very well know”.

The problem is, Lynch isn’t just anyone, and as a result of his pulling power, not just anyone was nursing losses from One51.

“The executives of One51 believe they are in some way protected from the financial crisis,” said Michael Soden, former Bank of Ireland chief executive, who very calmly addressed “Philip” in the manner of a teacher who’s not angry, just disappointed.

“Some shareholders might rightfully feel they are funding a lifestyle that is inconsistent with the performance of the company,” Soden noted.

Broadcaster Ivan Yates, an independent director of One51, assured shareholders that while recent reports had troubled him, as far as its investments were concerned, One51 was “no better or no worse than anyone else”.

There was more damning with faint praise from financier Paschal Taggart, who was incredulous that the directors would not reveal the nine executives who shared in the disputed €2 million patent payout.

“By the way,” he clarified: “I don’t blame Philip for losing my money. I’ve lost more money with the banks.”

By the time the now malfunctioning Shelbourne mics got to the pinstriped rebel Gerry Killen, he was clearly in the mood for the odd joke.

He’d played golf with Lynch in the past and “I hope we’ll play again”. Lynch shook his head, as the laughter rippled.

“When I wake up in the morning and look in the mirror, I want to see George Clooney, but that’s not who’s looking back at me,” Killen continued. “There are people on this board who still think they’re George Clooney.”

Lynch returned to the podium with an identity quibble of his own.

“His motives I wonder about, because it’s not the Gerry Killen I knew,” he said enigmatically, before thanking Killen “for getting us into the Sunday Business Post”.

Killen “wanted to be an heir apparent to Philip Lynch”, claimed Lynch, before digressing into how he had only had one-and-a-half days’ holidays all year. (They were in Spain.)

If shareholders wanted to vote Killen and his associates onto the board, they could “go right ahead”, declared Lynch. The “make my day” was silent.

There was no vote, of course: a bank of proxy votes and some legal stonewalling prevented that, and the queue for the soup began.

The Irish Examiner reports that the Director of Corporate Enforcement has referred at least 15 cases to the Garda fraud squad as part of its investigation of the banking crisis.

Enterprise Minister Batt O’Keeffe revealed the figure as he rejected claims by Fine Gael finance spokesman Michael Noonan of political foot-dragging in the probe into Anglo Irish Bank.

But Mr O’Keeffe said it is "absolutely outrageous" that Mr Noonan would ask the Government to interfere with the judiciary in relation to the Garda probe into Anglo. "The judiciary is independent of all of the state institutions. It has to have regard for all of the rights of the individual under the constitution and surely Michael Noonan is not asking our Government to interfere with the judiciary. If he is, it is an outrageous call and a call that we reject out of hand."

He said the Government wants to ensure people who have "fractured the law or broken the law be held responsible and accountable".

"Look, it would suit us as a Government if the action was taken tomorrow morning — we would love that.

"But you have to stand back and realise that gardaí have a job to do — that is to ensure they can put forward a case that will be taken up by the Director of Public Prosecutions and, until such a time as the gardaí, in terms of the fraud they are investigating, are clear-cut about what they can bring to a court of law, we must have patience and let them get on with their job.

"We, as a Government want to ensure that anybody, who breaks the law is subject to that law and is penalised by that law.

"But we, as a Government, also understand that there are processes to which people have to follow. One is that a person is innocent until proven guilty. The state will not take action against a person unless there is a clear-cut case and it can be proved in a court of law."

The minister revealed that he has met Paul Appleby, the Director of Corporate Enforcement, to discuss the progress of the Anglo probe and he indicated that the Government wants to make the probe as efficient and effective as possible.

"During the course of that meeting, it was indicated to me that there were a number of cases that he [Paul Appleby] felt could not be pursued by himself… He has now referred at least 15 cases to the fraud squad for them to investigate."

Mr O’Keeffe said not all the cases related to Anglo but to the wider investigation into the banking crisis.

A spokesperson for the Office of the Director of Corporate Enforcement declined to comment. However, the Garda investigation into the €7 billion transactions between Anglo and Irish Life & Permanent is now believed to be at an advanced stage.

The second stage of the Commission of Investigation banking inquiry is under way and a separate independent review of the Department of Finance’s role in the crisis is due to be completed this year.

The minister also revealed details of a "plain-talking" meeting he, Finance Minister Brian Lenihan and Communications Minister Eamon Ryan had with AIB officials on Monday to discuss lending to SMEs. He said the bank has committed to make €6bn available over the next two years, particularly in Cork, where the bank has its strongest base.

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