Vulture funds already reap rewards
Published 16/04/2011 | 05:00
ECONOMIC vultures circling the Quinn Group are already reaping the rewards, writes Donal O'Donovan.
There are several US "vulture funds" that had previously snapped up Quinn Group's €1.3bn of debt at prices as low as 40c in the euro.
The loans are now due to repaid in full under new owner Anglo Irish Bank.
On the face of it this means a profit of around 150pc for some investors -- and the deal also sees lenders to Quinn Group come away owning a slice of the best parts of the business empire.
Vulture funds buy debt when other investors are desperate to get out of deals. They are known and feared for their tough negotiating strategies.
Vulture funds have been active in the Quinn situation for months. They first got involved last September when nervous lenders started selling their paper at steep discounts.
But investing in distressed debt is a high-risk business. Hedge funds that bought into the subordinated bonds of Irish banks last year have taken some big Irish write downs, especially after changes to laws gave the government powers to impose losses on bondholders.
The money that Quinn Group owes is separate from the money Sean Quinn and his family owe to Anglo Irish Bank.
The company debt was originally borrowed from UK bank Barclay's and from US pensions and insurance fund.
Under the deal agreed between Anglo and the Quinn Group lenders, some of debt will now be owed by the manufacturing parts of Quinn Group.
The rest is to be paid back with proceeds from the disposals of other Quinn assets.