Cantillon

Inside the world of business

Inside the world of business

Quinn true to type with enigmatic departure

TRUE TO type, the departure of Seán Quinn from the business he founded 37 years ago was enigmatic to say the least.

The reasons given for his decision will no doubt be pored over by those looking for some insight into the complicated three-way game of chicken being played by the Quinn family, the Quinn Group and Anglo Irish Bank.

READ MORE

The bank is owed some €2.8 billion by the family and has a charge over their shares in the Quinn Group. The company, in turn, owes €1.3 billion to a syndicate of banks and bondholders. This debt is secured on the business and is due to be repaid later this year.

The relinquishing by Quinn of his executive chairmanship presumably make its easier for the board of Quinn Group to concentrate on the refinancing of this debt without being distracted by implications – good, bad or indifferent – for the Quinn family of whatever action it takes in the interest of the company.

By the same token, the arrangements being entered into by the Quinn family and Anglo Irish Bank in respect of their €2.8 billion debt should now be at a remove from the financing of the business.

If nothing else they should be better placed to pursue their debts against the Quinns without jeopardising the viability of the Quinn Group.

On the other hand the bank’s extraordinarily flimsy security for its debt has just become a bit flimsier.

Intriguing.

Tough talk is the easy bit

The National Asset Management Agency faces an uphill struggle to win the affections of the Irish people, but its chairman Frank Daly should be careful about over-promising.

In a robust speech to a roomful of accountants yesterday, Daly held out the prospect of the nation’s vengeance being enacted on the property developers who have caused so much trouble.

His suggestion that those developer types who have not yet abandoned “the extravagant mindset” of the past are in for a rude awakening was heartening.

But while it may be what the punters want to hear, his speech contained hints of the real difficulties that are inherent in the Nama project.

“The Nama model itself is relatively straightforward, although the practicalities associated with giving effect to it are not,” he told delegates yesterday. True words. Comments after the speech gave an insight into some of the “practicalities” Nama is already encountering.

Despite the tough talk about no borrower being “too big to fail”, Daly suggested that some of the top 10 borrowers whose loans are transferring to Nama may not be paying interest due on their loans – a worrying thought considering that one of the central tenets of Nama is that the interest on performing loans will offset the interest cost of securities issued by Nama. Mr Daly rightly pointed out that the entire notion of “servicing loans” is itself complicated by the fact that developers may have had specific arrangements in place with their banks, such as interest roll-outs.

Although only one, relatively small example, this glimpse into the practicalities involved in the Nama process suggests the scale of the task facing the agency. While Daly’s robust approach to developers is welcome, let’s hope the rhetoric lives up to reality.

CRH subsidiary in the mix

The cement industry does not have the best reputation in the world for sticking to the letter and spirit of competition law.

The EU fined the entire industry for anti-competitive practices in the late 1990s, and it frequently finds itself under the anti-trust microscope on both sides of the Atlantic. Authorities in Florida are conducting an investigation of the sector there.

Last year, Poland’s office of consumer protection (OCCP) fined CRH subsidiary Grupa Ozarów €25 million for its part in a price-fixing and market-sharing arrangement with a number of other players in the country.

Ozarów is appealing the ruling, and its parent is confident that this will succeed, as it believes that the authorities ignored centrally important evidence when they made their decision. The Irish group has maintained its innocence, or rather that of its subsidiary, all along, so it’s no surprise that it’s going to appeal, nor is it a surprise that it says it will ultimately be vindicated.

This would do the group’s reputation no end of good, and help it to deal with other allegations of anti-competitive behaviour that are, rightly or wrongly, thrown at it from time to time. If it fails, it could leave it with more questions to answer.

One interesting aspect of the Polish case is that CRH’s peers Lafarge and Heidelberg both availed of a whistleblower’s provision (known as leniency) and avoided fines by handing over documents and other evidence to the authorities. Ozarów did not, presumably because it believes that it did nothing wrong and therefore had no evidence to hand over.

But the fact remains that the Polish authorities had evidence and imposed the fine. As a result, there has to be at least some onus on CRH and Ozarów to challenge the OCCP’s case. Whatever the group’s position, from anyone else’s point of view, this is at best a 50/50 call. Ozarów either did it or it did not, and we will only find out the answer when the appeal is heard and a final ruling is made.

Today

Taoiseach Brian Cowen will address the annual conference of the Chartered Accountants Ireland.

The European Central Bank’s governing council meets to discuss interest rates and measures to soothe market volatility over fears of contagion from the Greek financial crisis.

Online

For regular commentary on business and economic issues visit our blog, Current Account, at www.irishtimes.com/blogs/business

Twitter users can receive links to the latest business news and blog posts by following us at

twitter.com/IrishTimesBiz

Podcast

You can listen to our weekly business podcast at www.irishtimes.com/business/podcast