Inside the world of business

IBRC upheaval leaves Quinns in dark

The impact of this week’s developments on the battle between the Irish Bank Resolution Corporation and the Quinn family remains unclear.

A question and answer document posted on the website of the Department of Finance website says the special liquidators appointed to the IBRC have the power to continue with legal claims heretofore being pursued by the bank.

That would seem to indicate that the liquidators can still seek to retrieve the foreign properties the Quinn family sought to put beyond the bank’s reach. An interesting aside here is whether the deal with the Russian Alpha Group, under which it would retrieve the assets and share the proceeds with the bank, will go ahead.

Richard Woodhouse (above), the senior IBRC executive who swore most of the affidavits in the case, is one of those who is no longer with the bank as of this week. One can imagine that his departure is warmly welcomed up in Cavan.

As for the Quinn family’s claim against the bank that the Quinn Group was seized on the basis of loans that were illegal, the department’s QA says the effect of the IBRC Act “is to place an immediate stay on all proceedings against IBRC that are before the courts” and that claimants who have issued proceedings against IBRC will “now have to pursue and prove their debt to the liquidators. Such claimants will rank as unsecured creditors in the liquidation”.

This would (a) seem to question whether the case can continue, and (b) raise the issue as to whether there is any target now for the Quinns in terms of getting substantial damages. These matters are never straightforward. The argument by the family that the €2.8 billion the banks says the family owes was issued illegally forms part of the family’s defence to the bank’s case on the foreign property portfolio. But even if the issue was aired in court in that context, it would not mean the family would get any damages if they successfully argued the case.

Another issue for the Quinns is the possibility of their loans being moved to Nama after six months , or indeed being bought from the liquidators by some third party before that, and how such developments could affect matters.

Mr Justice Peter Kelly noted in the High Court yesterday that the Act appeared not to give the courts any power to lift the stay on proceedings against the bank.

Constitutional challenge, anyone?

Food for thought for Coveney

The Minister for Agriculture must be reasonably hopeful that he has contained the horse meat scandal for the time being. Simon Coveney was helped to no small extent by the Magdalene laundries report and the promissory note deal, which helped get meat off the front pages.

The damage has been considerable, however, particularly to ABP Food Group, which owned the burger plant at the centre of the storm. But the message coming from the industry and backed by the Government is that a basically sound industry has been compromised by a supply chain itself contaminated by “filler” sourced from Poland either directly or through third parties.

The Government will be doing well if it can hold this line. The reports that some French beef ready meals contained nothing but horse meat raises the prospect of a much deeper and wider problem in the low-cost end of the market.

Food processors and their big customers have gone into overdrive to establish the extent of this sort of contamination and adulteration across Europe. The outcome could be damaging and Ireland could find itself at something of a crossroad.

One of the questions that the leadership of ABP must be asking themselves is why they were in the low-cost burger business to begin with. With hindsight it was foolish to risk the reputation of the company – rebuilt over a decade or more – by being in a business where profitability required you to buy the cheapest possible “meat” and run the risks that have now manifested themselves.

The soul-searching at ABP should be mirrored at a national level. If Ireland is serious about its quality food image there are clearly some food businesses in which we don’t want to be, especially if the worst-case scenario proves true and Europe’s low-cost meat industry is shown to be systemically compromised.

Rather than rest on his laurels, the Minister should make sure he gets out in front of this potentially much bigger problem.

Parting is such sweet sorrowThe dramatic liquidation of Irish Bank Resolution Corporation led to feverish speculation about the compensation terms that chief executive Mike Aynsley and his fellow senior executives might get. All the senior execs were removed from the payroll once KPMG was appointed as special liquidator on Wednesday.

Initially, rumours circulated that, because the bank had been liquidated, there was no provision in the contracts of Aynsley or his team to compensate them for loss of office. All they would be entitled to would be statutory terms.

Cantillon understands there is a provision in Aynsley’s contract whereby, in the event of a liquidation, he is not entitled to make any claim or charge on the company. However, it also provides that he is entitled to a position of similar stature on the same financial terms with whatever successor entity is put in place.

In this case, that would likely be the special purpose vehicle that the National Asset Management Agency will set up by the middle of this year to take over the rundown of whatever loans the KPMG team doesn’t shift in the meantime.

This seems an unlikely scenario.

Aynsley’s contract is also believed to include a clause that he receive 12 months’ compensation on loss of office. Similar terms are thought to apply to the other senior executives at the bank.

The expectation is that Aynsley will now receive a payoff equating to 12 months’ remuneration. He was paid a basic salary of €500,000, a pension contribution of €125,000 and other benefits of €38,000.

These matters will all have to be worked out in the coming weeks between the individuals, the special liquidators and/or the department.

It seems unlikely that the Government would leave the senior executives swinging in the wind over compensation payments. Not that this will matter to the Opposition or interest groups, which will line up to give the Government a kicking over any compensation paid to the executives when the details emerge.

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