In a dramatic illustration of the upheavals in Ireland following the crash of the Celtic Tiger, the nationalised Anglo Irish Bank announced today that it had seized control of the Quinn Group from ex-billionaire Seán Quinn and his family.
Seán Quinn, Ireland's once richest man, built up a conglomerate originally from quarrying and later he moved into cement and glass production. In the hospitality area he operated hotels and golf courses but his biggest cash cow was Quinn Insurance that beat rivals on price and convenience using phone sales in the pre-internet age.
He was felled by a disastrous gambling bet that shares in the famed 'builders' bank Anglo would keep on rising and as the recession began to bite with personal losses mounting, the group became increasing reliant on the cash cow.
On March 30, 2010, provisional administrators were appointed to take control of Quinn Insurance, which had 1.3m customers, including those who transferred from the health insurance business of the Irish unit of UK company BUPA in late 2007. The Financial Regulator had claimed that Quinn was in serious breach of regulatory rules, by providing guarantees for borrowing by other units of the Quinn Group.
Quinn Insurance had posted a loss of €788.4m in unaudited accounts for 2009, which had been provided to the Financial Regulator by the court appointed administrators. The loss comprised a trading loss of €127.5m on its underwriting activities and exceptional costs of €677.6m resulting from the writedown of certain non-core assets held by subsidiaries, understood to be a wind farm in Derrylin, Co. Fermanagh and a number of hotel properties. The losses on underwriting activities was made up of €41m related to its business in the Republic and €86m to the UK.
The Quinn Group had ended up owing the former builders' bank €2.8bn and €1.2bn to other lenders including bondholders.
Kieran Wallace of KPMG has been
appointed share receiver and has power to take control of the family’s interests
in the group. He will oversee the appointment of a new board of directors.
It was also announced today that a
joint venture of US insurer Liberty Mutual and State-owned Anglo Irish Bank has
been confirmed as the preferred bidder for the general insurance business of
Quinn Insurance Ltd (QIL).
The Central Bank of Ireland said it notes the announcement by the Joint Administrators on the preferred bidder for Quinn Insurance Limited (QIL) (under administration). The proposal is still subject to formal regulatory approval. However, the Joint Administrators have been keeping the Central Bank appraised throughout the sale process.
The Joint Administrators have announced that the proposal of the preferred bidder is that a new insurance company will be established, subject to Central Bank approval. This company will be majority owned by Liberty Mutual. It is also proposed that Liberty Mutual will provide the management and insurance expertise. Anglo Irish Bank will retain a minority shareholding in the new firm but will have no dealings in the day to day management of the new company.
This announcement does not affect policyholders of QIL, Quinn Healthcare (QHC) or Quinn Life Direct (QLD). Policyholders of QIL, QHC and QLD can continue to renew policies, take out new business and make claims in the normal way.
Minister for Finance
The Minister for Finance, Michael Noonan T.D., today noted that Anglo has appointed a share receiver over the Quinn family’s shares in the Quinn Group.
The Minister stated:
“I welcome the debt restructuring plan which has been agreed in principle
between Anglo Irish Bank and the Group’s lenders. This structure will enable the
good and strong businesses to continue to trade and grow. It is particularly
important that there will be no impact on employment, on trade creditors or on
day to day operations of the Quinn Group.”
A Reckless Gamble
Seán Quinn had built up a stake in Anglo Irish Bank through a financial betting product called Contracts for Difference (CFD). The CFD's allowed him to acquire a right to buy shares by providing 10% of the value and the tax regime was also favourable compared with an outright purchase. He was expecting the price of Anglo's shares to continue rising.
By 2008 Quinn had used
CFDs to build a potential stake of 25% in Anglo but the Anglo price was sliding
and in July 2008 to cut his potential future losses, he converted the CFDs into
an ordinary 15% shareholding. It cost him around €2.5bn and some of the shares
were bought with borrowings from Anglo. Besides, the remainder of his position
was bought out by 10 major customers of Anglo and the bank lent them the money
for the deal.
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