Quinn talks are discussing 'haircuts' for bondholders
Discount on €600m sum owed could make or break rescue deal
Published 24/04/2010 | 05:00
Bondholders in the Quinn Group are examining proposals which would see them taking discounts or "haircuts'' on the face value of the bonds they hold in the indebted group.
The Quinn Group, owner of Quinn Insurance, is believed to owe bondholders about €600m and discussions in recent days have seen the focus shift to what kind of recovery the bondholders can expect from a rescue deal for the indebted company, which was founded by Sean Quinn.
This rescue deal would seek to stabilise the Quinn group, deal with the solvency problems at Quinn Insurance, while paying off the bondholders, but at a discount. This discount could make or break the deal.
The mainly US bondholders are entitled to enforce security against the company and seize assets, but this court-based process would take a long time and could be very expensive.
As a result the bondholders, while in a strong legal position, may be prepared to take a discount on their securities, which have no credit rating and are not traded on open markets.
Anglo, a bank syndicate and the mainly US bondholders are poring over the latest financial information from the Quinn Group as they try to firm up a deal which can win the approval of the Financial Regulator and the government.
The precise level of discount on Quinn Group bonds is believed to be the central issue currently occupying the sides.
The valuation of the group is vital as it will help the bondholders to assess what a break-up of the company would yield versus the alternative option of being paid off by Anglo Irish and other investors.
The talks are expected to take another two to three weeks and no deal can be done without the express permission of Minister for Finance, Brian Lenihan.
Several private equity players have offered to become co-investors with Anglo in the deal, but most of these approaches have been spurned to date.
The Quinn Group has two distinct parts, the Quinn Group itself which has debts of €1.2bn, and the Quinn family, which has debts of €2.8bn.
The Quinn family's debts with Anglo are secured on the shares of the Quinn Group, while the bondholders and bank syndicate own the assets in the Quinn Group.
Anglo has taken an impairment on its Quinn debts in the 2009 accounts, it is understood. But the full scale of the debt is not yet recognised in the accounts and could have the effect of reducing the bank's regulatory capital once again.
A number of insurers are circling Quinn Insurance, while other interests would be happy to buy the pub and hotel assets.