The Quinn Group's ability to service debts to Anglo Irish Bank has significance for the public purse, write COLM KEENAand UNA MCCAFFREY
THE QUINN Group is a great Irish business success story and a seriously large issue for the Irish taxpayer. Hopefully, as the coming years unfold, it will become even more of the former and less of the latter.
In relation to the latter aspect of its status, the most impressive part of the story is the size of the figures. Seán Quinn, his family and their businesses are understood to be the single largest customers of nationalised Anglo Irish Bank. The amount involved is not known, but must be in excess of €2 billion, given the scale of the debt to that bank owed by some of its property development customers.
The success of the Quinn Group and of the family’s various investments outside the group are therefore of direct and significant interest to the taxpayer and the exchequer.
As is well known, Quinn and his family built up a stake in Anglo of at least 25 per cent, and perhaps up to 28 per cent, using contracts for difference (CFDs), legal entities that do not involve direct ownership of shares.
As the bank’s share price plummeted last year, Quinn’s bet on the bank turned spectacularly sour, and it appears he used further bank finance to shore up his position. He eventually bailed out, again apparently using bank money, and bought a direct 15 per cent shareholding. That investment has now also gone south.
In the group’s latest accounts it is stated that the family’s “property portfolio outside of the group continues to progress well and some of these investments will rank amongst the best we have ever made, and will go a long way towards recovering the very substantial losses incurred in the stock market over the past few years”.
However, some of these investments are held by way of Quinn Finance Holdings, an unlimited company that does not publish its accounts, and Quinn Property Investments Ltd, the latest accounts for which are for 2007 and show a group loss of €33 million. The Anglo adventure involved write-offs totalling €888 million in relation to loans to these companies.
The Quinn Group accounts show that at the end of 2008 shareholders’ funds in the group were €753 million. Leaving aside exceptionals, the pre-tax profit figure was €466 million, an impressive performance for a company largely operating in an economy in turmoil.
The Quinn Group has already, over the 2007 and 2008 years, written off up to €888 million arising from the family’s disastrous Anglo engagement. We don’t know, but it would be fair to suspect, that a large part of the €200 million taken from the group by the family last year in dividends went towards financing the family’s bank debt.
The whole Anglo/Quinn affair is the focus of a number of inquiries, including ones by the Financial Regulator, the Office of the Director of Corporate Enforcement and the UK Serious Fraud Office.
Included in the inquiries is the operation mounted by senior Anglo figures, and seemingly approved by the then Anglo board, whereby that part of Quinn’s CFD position not being taken up by him was taken up by 10 Anglo customers who were requested by the bank to do so, and were given money by the bank to do so.
Astonishingly, the security against these loans was for the majority part limited to the shares purchased. The taxpayer looks set to carry a loss of in the region of €300 million arising from this debacle alone.
Quinn deserves huge credit for the €3.8 billion business he has built up, with its dizzying range of activities and 8,000 employees around the world, 5,500 of whom are based in Ireland. The group expects to pay about €140 million in corporation tax this year and is dealing with the downturn both by investing and by stepping up its exports.
A company that can more or less be relied upon to throw off underlying profits of almost €500 million each year, even during a recession, deserves credit at any point in the economic cycle. It also, of course, provides for a substantial ability to service, and pay off, debt, even if it is debt of the order believed to be the case in the Quinn family scenario.
The Quinn Group has restructured in the period since the Anglo collapse and has put in place a format more akin to a plc than a family-run business.
The introduction to the Quinn accounts says the story of the group is “a story of success, service and strength for the past 35 years”. For now, the family faces difficult trading conditions while also trying to deal with the fallout from their disastrous Anglo adventure.
