Quinn future still in doubt as funds join crunch talks
Published 04/11/2010 | 05:00
MORE than 40 mainly US hedge funds are now involved in the crunch talks over the €1.3bn of debts at Quinn Group, but so far they have tabled no demand for shares in the Sean Quinn-owned company.
Some of the hedge funds are holding as little as €500,000 worth of debt, but their presence is making a resolution of the huge debt problems more difficult.
The Irish Independent first revealed in September the presence of York Capital, one such hedge fund, but it has now been joined by a large number of other funds, many of them holding comparatively tiny amounts of debt.
The length of time it is taking to sell Quinn Insurance is the main stumbling block to a deal at the wider Quinn Group.
The hedge funds may yet push to take direct shares in the Quinn Group, but so far talks are focusing on putting in place more expensive loans, some with rates of 2.5pc above the European interbank rate.
The hedge funds and other debt-holders will be looking to have their legal costs paid and fees for other advisory services may also have to be picked up by the Quinn Group. The lenders have not declared any view yet on Mr Quinn and his family's continued involvement in the firm, but all cash thrown off by Mr Quinn in future will go towards paying down debt. Quinn Group will shortly publish its annual accounts for 2009 showing a profit, albeit down sharply on previous years.
Those familiar with the talks have strongly denied a report that Quinn lenders have vetoed a debt plan. Instead talks were described as following the usual pattern of debt negotiations, with a London law firm representing the note-holders and the main banks representing themselves.
The hope now is that Quinn Insurance can be sold and the Group given a new lease of life. During talks, consideration has been given to agreeing most of the elements and leaving aside the issue of the controversial guarantees given to lenders by Quinn Insurance subsidiaries.
The hedge funds have been able to buy the Quinn debts at less than 60 cent in the euro. Once the funds buy into the debts they are entitled to see the company's accounts. During the summer, a new business plan for the Quinn Group was agreed and the business has managed to hit these targets.
Mr Quinn and his family still claim they can repay €2.8bn of debts to Anglo. This claim rests on two assertions -- one is that the bank will be able to buy Quinn Insurance and get regulatory clearance for this; the second is that Mr Quinn and his family can also extract value from the Quinn Group, which remains profitable.
But many observers of the Quinn Group are sceptical of this, particularly if Anglo fails to purchase Quinn Insurance.
In a recent statement, Mr Quinn and his family said: "A significant element of the repayment of debt will result from a realisation of substantial returns from Quinn Insurance.
"These will be generated under the proposal being considered by Anglo Irish Bank which is using highly reputable and internationally acknowledged financial advisers."