Taxpayer will take hit of up to €1bn if deal fails
ANGLO Irish Bank will require immediate taxpayers' assistance, possibly to the tune of €1bn, if its deal to takeover the entire Quinn Group falls through, the Irish Independent has learned.
Anglo is owed €2.8bn by the Quinn family and the security for these loans are the shares in the Quinn Group. However, other creditors are ahead of Anglo in the queue and the only way it can jump the queue is by taking over the entire Quinn Group and paying off certain bondholders.
If this does not happen the bank will have to write-off some of the Quinn debts and take what is known as an impairment in its books. This would push the amount of capital it has below certain regulatory limits, forcing the bank to apply for additional taxpayers money via the Government.
The bank has to disclose any major impairments each month to the regulator and the Quinn family are the largest borrowers of the bank in the country.
The bank is believed to have already taken some write-downs but the majority have yet to come. If the Quinn debts are written down, the need for additional money is almost immediate. The bank said in its recent annual report that it was monitoring the situation closely at the Quinn Group. Its takeover plan has been opposed by the Regulator to date, although both sides are still in discussions. The proposal from the bank is gaining some momentum, but the Regulator has a host of reservations.
Among these are Sean Quinn himself and the type of expertise Anglo can line up to run the insurance company.
Donal O'Connor, the former chairman of Anglo, is one of those who has been mentioned as having some involvement in Quinn Insurance, post an Anglo-takeover. The Regulator has refused to comment specifically on his reservations about such a tie-up, but many hurdles remain before it gets clearance.
The Regulator is also interested in hearing from the 20 companies who have expressed an interest in potentially buying Quinn Insurance.
Among the 20 companies are private equity players and several major international insurers, including Axa, Aviva and some Dutch insurance groups.
Many Quinn insurance lines have been under pressure since a provisional administrator was appointed.
The commercial insurance part of the business is believed to be down by about 28pc, with motor down by 6pc.