Bank admits Anglo had to 'save Quinn'
Report refers to 'political pressure'
Anglo Irish Bank believed "political pressure" would be needed to keep the Quinn Group afloat after the bank was nationalised in January 2009.
The admission, in a report on the Quinn Group which went to the Financial Regulator and the Department of Finance, is the first time the political importance of keeping the Quinn Group trading at all costs has emerged.
The bank, which in January 2009 was being run by Donal O'Connor, the former PwC managing partner, and Alan Dukes, the ex-Fine Gael minister for Finance, told advisoers to the State it believed the Government "may" have to force AIB and BoI to cough up billions to renew the group's financing.
Fianna Fail, the party in power at the time of Ireland's disastrous state guarantee in September 2008, has always denied that there was political pressure to guarantee Anglo because of its exposure to Quinn -- who at the time employed thousands of people along the border.
It is certainly strange that less than six months later, suddenly the issue appears explicitly in official documents.
The idea that the bank had to save the Quinn Group at all costs for the good of the country has been described as one of the facets of the so-called "green jersey agenda" by the bank's former boss David Drumm.
The report on the Quinn Group, which was prepared by PwC, shows that despite Anglo having already loaned the Quinn Group and the Quinn family €2.8bn, it provided the group with another €26m interest roll-up facility in February 2009. This was just weeks after it was nationalised and at a time when it was fighting to bring in cash.
The report also states that the bank would find it difficult to be repaid by the Quinns until "solvency ratios" of Quinn Insurance and certain cash flow levels were back on track. The documents show that long before the true extent of the Quinn's precarious finances were fully known, the bank was worried about getting its money back.
The Quinn Group was valued at €4.3bn but had debts of €4.1bn, leaving "very little headroom", PwC noted.
It said KPMG was trying to put a more up-to-date value on the business in the wake of property valuations continuing to fall as the recession deepened. Overall, despite its concerns, Anglo remained positive about the Quinn Group in 2009 and both sides worked together on a plan to repay €1bn to the bank.
This relationship, however, gradually worsened as Anglo -- since rebranded as IBRC -- realised the Quinn Group's financial position, and in particular the strength of the Quinn Insurance, was far worse than it imagined.
In the coming weeks, Grant Thornton, the Central Bank-appointed administrators to Quinn Insurance, is expected to tell the High Court the size of the hole in its reserves is between €800m and €1bn. This bill will have to be picked up by the taxpayer.
Next Tuesday, meanwhile, former billionaire Sean Quinn, his son Sean Jnr and his nephew Peter Darragh Quinn are to be told by Ms Justice Elizabeth Dunne whether she has decided they have acted in contempt of an order of the High Court.
The reserved judgment arises from a case where the court heard a series of accusations from taxpayer-owned IBRC that the three men had tried to put certain assets beyond the reach of the bank after an order to desist in any such efforts was made in June.
The Quinns deny all charges.
Sunday Indo Business