Quinn's Swedish arm found bankrupt

A STOCKHOLM court has declared the Quinn family’s Swedish company bankrupt.

Quinn Investments Sweden, the top firm in the family’s international property group, will be taken over by a receiver empowered to liquidate its assets in order to compensate creditors.

The judgment was a win for Anglo Irish Bank, which had petitioned the court to put the firm in bankruptcy after it failed to respond to repeated requests for the repayment of loans.

“The bank welcomes the judge’s decision which reflects the economic reality of the circumstance that (Quinn Investments Sweden) is not in position to pay its debts,” said Richard Woodhouse, a senior Anglo executive. “We will now have a mechanism through which to preserve value ultimately for the benefit of the Irish taxpayer.”

Leif Baecklund of Sweden’s Setterwalls law firm, will take the reins as receiver of Quinn Investments, a holding company for properties in Russia, Ukraine, India and Turkey. Together they are worth about €500 million.

Anglo told the court that Quinn Investments had no more than 30,000 Swedish kronor (€3,277) in its coffers and lacked the assets to repay the 16 billion kronor (€1.8 billion) it owed the bank.

Though Anglo argued that obligations for the loans extended to all Quinn companies, Quinn Investments insisted it was only responsible for the funds it received - about €129 million. The company said it could raise €344 million in as little as three months through the sale of Russian properties located in Moscow, Kazan, Ufa and Yekaterinburg.

But in a separate testimony, property expert Thomas Lindeborg suggested that sales of this kind often take six months to a year to complete due to heavy bureaucracy, including extensive documentation often required by Russian authorities.

Given Mr Lindeborg’s testimony and the fact that several properties at issue in the case have yet to be completed, the court questioned whether they could be sold quickly enough and at a sufficient price to meet the requirements of solvency. As a result the court supported Anglo’s argument that the firm is insolvent.

However, the court agreed that Anglo could only prove it was owed €129 million citing ongoing legal proceedings in Ireland related to the validity of the overall loans.

The Quinn family welcomed that aspect of the decision, though it still intends to appeal the verdict, said a source close to the family. The limitation will likely have little impact on the ultimate recovery of funds by Anglo through the sale of properties. The Swedish receiver will control the boards of each of the subsidiaries below Quinn Investments Sweden and the bank holds share pledges and mortgages over individual properties.

In all, the Quinn family owes Anglo Irish nearly €2.9 billion, most related to loans that covered the family’s losses on Anglo shares as a result of the 2008 financial crash.

The parties will appear before the court again on August 23rd.

The Quinn family owes Anglo almost € 2.9 billion, of which the €2.34 billion relates to loans to cover their investment in Anglo’s shares and the resultant losses in the 2008 financial crash.

The bank managed the unwinding of Quinn’s 28 per cent investment in 2008 by lending to his family and 10 customers, and dividing the large shareholding to avoid the dumping of the stock and a collapse of the share price.

In April it took control of the Quinn Group in a complex restructuring that saw it end up with 75 per cent ownership of the group, with the banks and bondholders taking the remaining 25 per cent. The restructuring was effected by the appointment of a receiver over the family’s shares in the Quinn Group which had been pledged against their debts.

The properties and the legal battles: Battlegrounds for Quinn property

Dublin:

Quinn is taking a legal action against Anglo to overturn the Quinn Group receivership. They claim Anglo’s lending to the family was “tainted with illegality” as the loans were provided to prop up its share price. Anglo claims the Quinns did not question the validity of the loans until repayment was sought in 2011. Anglo’s bid for injunctions to prevent the family transferring assets from Swedish companies are to be heard later this month.

Stockholm:The court in Stockholm yesterday appointed a receiver to Quinn Investments Sweden. The move affects 19 properties. Any sale is likely to be contingent on market conditions.

Anglo has lodged court proceedings in Stockholm, alleging that new shares in seven Swedish subsidiaries were issued to a firm called Indian Trust AB. Peter Quinn, a nephew of Seán Quinn, is identified as the sole director of the firm, according to Anglo.

Cyprus:The Quinn family has secured a temporary injunction preventing Anglo Irish and the bank's receiver from changing the board of directors at three of the family's Cypriot companies. A number of Quinn Cypriot companies in turn own shares in Russian companies that hold the actual properties.

Moscow:Anglo has lodged proceedings in Moscow to stop further changes to Quinn companies incorporated there. The bank has claimed that Quinn's nephew, Peter, moved €4.5 million out of the Russian bank of a company called Finansstroy, which holds property assets in Russia including the Kutuzoff office block in Moscow.

The property produces the largest amount of rent among any of the family’s international properties.