Wednesday 14 November 2018

Quinn to plough on with Anglo despite €1bn loss

Analysts welcome tycoon’s vote of confidence as stocks take a battering

Sean Quinn, the astute businessman who has built up a diverse empire from scratch, is facing his
biggest challenge yet as the stock market suffers its worst downturn, causing him large losses
Sean Quinn, the astute businessman who has built up a diverse empire from scratch, is facing his biggest challenge yet as the stock market suffers its worst downturn, causing him large losses

Joe Brennan

Ireland's richest man Sean Quinn, estimated to be nursing a €1bn loss from his 15pc leveraged derivative position in Anglo Irish Bank, revealed yesterday he will continue to tough out the market downturn and convert his contracts for difference (CFD) interest in the group into ordinary stock.

The Fermanagh-born cement-to-insurance tycoon, who first emerged as a 5pc CFD holder in January last year, has already had to cover steep losses as his geared position has plummeted over the past 18 months.

CFDs allow investors to buy an interest in a stock for an initial outlay of as little as 10pc of its market price. However, if share prices fall, the holder must cover the losses in what's termed a "margin call" from his CFD provider.

Personal

Mr Quinn built up most of his stake in Anglo over the first nine months of last year in a personal capacity, market sources said, using Credit Suisse as his prime broker for much of the stake.

The stock was trading at an average of about €15 a piece during that period, giving Anglo a market capitalisation at the time of €11.4bn.

Anglo shares are currently changing hands at little over €4 each, valuing the country's third-largest listed bank at €3bn -- its lowest level in five years. Mr Quinn is long known to be a fan of the business bank and its management, headed by chief executive David Drumm.

Market sources believe Mr Quinn has already faced margin calls for as much as two-thirds of his leveraged exposure, leaving very little ground to cover to convert his interest into actual stock.

"The [Quinn] family regards these shareholdings in Anglo Irish Bank as long-term holdings with significant opportunity for capital growth over such a period," Mr Quinn said yesterday in a statement.

Decision

"In recent years, we have been highly impressed with Anglo's ability to outperform the banking sector in terms of profit growth and we are confident this trend can be maintained over the longer term, notwithstanding the current difficulties being experienced in international banking."

Anglo Irish Bank said it "never comments on shareholders or shareholder transactions."

Analysts largely welcomed Mr Quinn's decision to convert as representing a vote of confidence in the severely-battered stock. And while shares in Anglo spiked over 5pc in early trade yesterday, the stock traced other financials deep into the red as investors mulled a downbeat note from Credit Suisse on Irish banks.

Financials globally were also rattled by concerns that a number of US regional banks will not survive the ongoing turmoil in the housing market there. Californian lender IndyMac collapsed last Friday.

Anglo closed yesterday's session down 6.5pc.

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