Seán Quinn raised concerns in letter to Anglo over 'golden circle' transaction

 

BUSINESSMAN SEÁN Quinn warned Anglo Irish Bank that its placing of 10 per cent of its shares with 10 customers in the “golden circle” transaction in July 2008 was “ill advised” and would have “a considerable impact” on his wider business for many years.

Mr Quinn raised concerns with Anglo chief executive David Drumm in a letter shortly after the bank completed the transaction aimed at supporting Anglo’s beleaguered share price at a critical time in the growing banking crisis.

The letter, seen by The Irish Times, reveals the tension between Mr Quinn and Anglo over the transaction, which the Garda Bureau of Fraud Investigation and the Office of the Director of Corporate Enforcement are investigating.

Mr Quinn wrote that “a degree of panic” had driven the bank’s actions and that the transaction was “forced through” without considering the effect of the decline in the share price on his position.

The Quinn Group had no comment to make on the matter.

Internal Anglo records – dating from around the time of the bank’s nationalisation in January 2009 – estimated that he lost €955 million on the July 2008 transaction.

The bank estimated he had built up his investment at an average share price of €14. The July 2008 transaction was concluded at a price of about €4. Mr Quinn has since said he lost €3 billion on Anglo and other shares. He owes Anglo €2.8 billion, most of which relates to cover the losses on his investment in the bank.

In the transaction, Mr Quinn unwound his investment in Anglo through contracts for difference, (CFD) which had built up secretly. His family took almost 15 per cent of ordinary shares, while the “Anglo 10” bought the 10 per cent stake with loans from the bank.

In his letter, Mr Quinn argued that the bank should have considered his alternative proposal to sell enough shares to generate €100 million in cash to cover additional CFD losses on further declines in the bank’s share price.

“I am writing this letter to you personally without the benefit of advice from my colleagues or legal advice,” Mr Quinn told Mr Drumm in the letter dated July 26th, 2008 and marked “private and confidential”. “I strongly believe that the actions of the bank were ill advised and will have a considerable impact on our wider group for many years,” he added.

He said that from the date the transaction was first mentioned, in March 2008, until it was completed, Anglo’s share price lost 23 per cent against Bank of Ireland “yet the transaction was forced through” and he had been “given no visibility on who the purchasers were”, despite his requests.

Mr Quinn argued that he asked Anglo to reconsider the transaction before proceeding with it over the weekend of July 12-13th, 2008.

However, the bank’s approach the following Monday was “just as aggressive”, he said, and Mr Drumm “walked out of the telephone call” and did not return a call to him that day. He asked to meet Anglo’s board, “but this request was disregarded”. He tried “very hard” to get the bank to consider his perspective.

This was “in total contrast to our meetings in March when we spent considerable time discussing the potential placing”, he said. “On this occasion, there seemed to be a degree of panic driving the process which I feel did not reflect a proper considered action plan.”

Mr Quinn felt “the bank’s insistence on a sale was detrimental to our position and the longer term development of this group”.

“Whilst I accept your right to sell in a controlled fashion, the process should have had some regard to price, timing and some consideration of my alternative proposal,” he said.