The Anglo 10


ANALYSIS: Taxpayers are facing a loss of €300m over the secret deal to protect Anglo Irish Bank, writes SIMON CARSWELL

WHAT STARTED as an attempt to protect Anglo Irish Bank and its volatile share price at a time of severe financial instability has ended with taxpayers facing a potential loss of €300 million on a secret deal involving 10 of the bank’s wealthiest customers.

Following heavy falls in the bank’s stock over the St Patrick’s Day weekend last year, the Financial Regulator pressed Anglo Irish to change how its biggest investor held his interest in the bank.

Businessman Seán Quinn held an indirect stake of 25 per cent which had left the bank exposed to short sellers who were making big money betting on the stock falling in value amid the uncertainty surrounding Anglo’s stability.

Quinn agreed to change his interest in the bank but only took a direct shareholding of 15 per cent. This left Anglo with a 10 per cent stake which if sold on the market over a short period would lead to a collapse in the bank’s share price.

This had to be avoided at all costs given how the dramatic declines in the stock in March 2008 had raised wider concerns and led to substantial withdrawals.

Senior Anglo executives assembled a group of 10 long-standing clients of the bank who would buy the 10 per cent stake remaining following the unwinding of Quinn’s indirect position in the bank.

The bank agreed to lend the money to the customers and agreed that only 25 per cent of the borrowings would be recourse, meaning that the borrowers would only be held personally liable for a quarter of the loans.

The remaining 75 per cent was “non-recourse”, meaning it was secured on the shares. The transaction was completed in June and Quinn announced the following month that he had unwound his indirect interest in the bank through contracts for difference (CFDs), a type of share derivative, and taken a direct shareholding of 15 per cent.

Fast forward six months and following a series of controversies, the Government decided to take the bank into State ownership in mid-January.

This effectively made the bank’s shares worthless.

The following month the bank said it was taking a bad debt charge of about €300 million against the loans to the 10 clients due to “the permanent diminution in the value of the bank’s share price following nationalisation”.

Anglo documents – seen by The Irish Times – show that just before the bank’s nationalisation the 10 customers owed amounts ranging from €9.7 million to €56.5 million.

These were listed in Anglo’s records for December 2008.

The bank described the loans as “personal” in its records and noted that the value of the security backing the loans had declined, referring to the value of the shares supporting some of the loans.

The State-owned bank has said it intends to recover as much of the loans as possible.

A spokesman for the Department of Finance said that it supported the bank’s “efforts to recover all debts”.

Anglo Irish Bank’s records list the identities of the customers and their outstanding loans at December 2008.

The Irish Timescan confirm the names of the Anglo 10 today; the individual debts owing at the start of this year are also outlined here.

1 Jerry Conlan 

€56.5 million

2 Patrick Kearney 

€46.6 million

3 Seamus Ross

€46.4 million

4 Gerry Gannon

€46.4 million

5 Joe O’Reilly

€43.4 million

6 Brian O’Farrell

€41 million

7 Paddy McKillen

€38.9 million

8 Gerry Maguire

€31.7 million

9 John McCabe

€31.6 million

10 Seán Reilly

€9.7 million