Company documents show that US funds hold all the cards in future of Quinn cement
There is little doubt now that a split has emerged between former billionaire Sean Quinn and the management team that helped buy back a chunk of his former businesses in the Ballyconnell/Derrylin area.
Quinn returned to the company as a consultant after the cement, plastics and packaging businesses were bought in late 2014. A consortium of three international investment funds backed by a management team made up of former Quinn executives and local businessmen bought the businesses for €98m from the old Quinn Group.
Quinn is neither a director or shareholder in the business but is paid €500,000 as a consultant. The Quinn family confirmed that the businessman is in talks with the three US investment funds regarding concerns he has about protecting the company and jobs in the area.
This is a different way of saying, he isn't happy with how things are being run.
It has been reported that his advisers told management they would like Quinn to be a shareholder. This breakdown in relationships has happened at a time when there has been an increase in reports of intimidation and criminal damage to parts of the former Quinn business.
The Quinn family once again last weekend condemned all negative activity in the area. Sean Quinn has previously condemned attacks in the area saying it was not being done in his name.
It is far from clear what Sean Quinn can do to get back on the share register of his former business. He would have to buy out the US investors. Having just come out of bankruptcy, he would have to raise the money from banks and he may not be a bankable proposition for that kind of deal.
His family retain what is believed to be sizeable wealth, but that is tied down by the courts pending the outcome of complex legal action by IBRC against the family and counter legal actions against the state. They cannot reduce assets below certain levels pending the legal actions.
IBRC is pursuing the family for €2.8bn and is suing some family members over a scheme to put assets beyond its reach. The family claims that €2.3bn of the loans were illegal and is suing the State for the loss of their business, while also claiming they don't actually owe the money.
If both sides go ahead with the legal actions, it could lead to a long drawn out and potentially very expensive series of court battles.
Settling the actions might be very unpopular politically given the nature of some of the allegations made against the Quinns and the ultimate cost to the exchequer of the collapse of Anglo Irish Bank.
Without a government, there is unlikely to be a settlement. Even with a new government, the question of settlement talks with the Quinns could be very sensitive. While the cases have not been heard or settled, Sean Quinn could not rely on financing a buyout of his old businesses through the financial backing of his children.
When the local consortium bought out the business, backed by the US funds, there was a belief in some quarters that they were very much in Sean Quinn's camp, had his full support. Some thought they would simply sell the business to him at some point in the future.
An examination of the articles of association of the company that owns the cement business shows just how difficult that would be. Quinn Industrial Holdings is 88pc owned by the US investors through a Luxembourg firm and 22pc by a company called QBRC. QBRC is owned by a group of local businessmen and former Quinn Group management.
The US investors own the powerful voting A ordinary shares while QBRC owns the non-voting B shares. Throughout the document the B shareholders are referred to as the managers.
The company's incredibly complex, yet clearly defined, set of company rules set out a raft of scenarios around individuals who hold those shares or hold them in trust for family members.
The rules are completely watertight in preventing any of those managers from transferring shares to anybody other than a family member without permission. It sets out to prevent a situation where someone becomes a de facto indirect controller of those shares from the outside.
It clearly states that if one of the B share owners transfers his shares to an outsider, all of the other managers are legally obliged to inform the US investors as soon as they become aware of it.
If such a transfer happens, it can trigger a compulsory purchase of that person's shares by the US investors for a nominal amount of money - basically nothing.
If the US investors decide to sell some or all of their shares to a third party, that third party must offer to acquire the same portion of shares from the managers.
And if the US investors decide to sell, to what they call a "drag-on purchaser", the managers must agree to sell also. They will receive at least the same price per share as the investment funds will in the event of a sale, but the managers' hands are completely tied in relation to what they can and cannot do.
If Sean Quinn wants to buy or control a single share in that company, he cannot do it without the express permission of the US investors. The local management have day-to-day control of running the business but not votes at the board meetings and are completely tied down.
The former Quinn group, renamed Aventas, has been breaking up the old Quinn businesses through sell-offs. Accounts show that it sold the cement and plastics business to the investors for €98m and made a loss on disposal of €31m.
It sold the radiators business to Tony Mullins for just €3m after clearing its debts €21m of debt. It sold the glass business to a Spanish group for €410m which included €347m of debt and €63m for the equity. It sold its stake in Laya Healthcare for €22.4m and Gortmullan Energy for €7.5m.
At the end of 2014 it still had outstanding debts of €549m having paid back €373m to lenders.
The financial hit here has been substantial as Aventas management tried to operate and break-up the group in the face of dozens of criminal incidents of arson and intimation, and sabotage.
Aventas chief executive Paul O'Brien may have been well paid, receiving €1.3m in remuneration in 2014, but had his car set on fire outside his home as he slept.
The Quinn saga still has several turns to take. Will a new government sanction a settlement of outstanding litigation? Can Quinn raise the money to buy out some or all of the former cement business from the US investors?
The US funds will want a premium on what they paid. However, if the current spate of incidents continues, there may not be many other willing buyers.
Undoubtedly the recent spike in intimidation in the area reduces the number of potential buyers and the value of these companies.
Not everybody is prepared to risk millions buying into that sort of trouble.
How long can Quinn remain as a €500,000-per-year consultant to the business if relations with the management team have turned sour?
Compromises could be found, but given the way the business is structured, the US investors are holding all of the cards.