Trade buyer more likely for Quinn Insurance

THE DEADLINE for second-round bids for Quinn Insurance passed yesterday as the likelihood of a sale to a trade buyer grows amid uncertainty over the future of State-owned Anglo Irish Bank.

The bank has submitted a joint bid with US insurance giant Liberty Mutual, which has also submitted an offer to take over the general insurance part of the firm.

Anglo has shelved plans for a solo offer due to considerable regulatory hurdles facing the proposal as the cost of the bank has soared to as much as €34 billion.

Other companies said to be interested in taking over Quinn Insurance include US firm Travelers, Swiss insurer Zurich and German company Allianz.

Travelers and Allianz had no comment to make, while Liberty Mutual and Zurich did not return calls seeking comment. Anglo and investment bank Macquarie, which is managing the sale process, had no comment either.

Quinn Insurance, historically the most profitable part of the conglomerate run by businessman Seán Quinn, has been in administration since March when the Financial Regulator raised concerns about its solvency levels.

A sale to a trade player with existing Irish operations would likely lead to a sharp downsizing of the firm and further job losses.

It could also lead to the Quinn family losing ownership of the insurer, which Mr Quinn has said he must retain if he is to repay loans of €2.8 billion to Anglo due mostly on share losses in the bank.

Most of the trade bidders circling Quinn Insurance are interested in taking over its customers rather that the overall operation.

Ted Kelly, chief executive of Liberty Mutual, told The Irish Times last May that he would keep the insurer intact if its bid was successful as it has no competing businesses in Ireland or Britain.

This would limit any further job losses beyond the 800 secured from the 2,400-strong workforce.

A preferred bidder may be named before the end of the year but further due diligence may be required until early 2011.

Meanwhile, debt restructuring talks are continuing with the syndicate of banks and bondholders owed €1.3 billion by the Quinn Group. The number of bondholders has spiralled over recent months as some of the original lenders have sold their debt on at a rate of about 40 cent in the euro.

Under the Anglo-Liberty bid, the US firm would invest less than €200 million in capital while the bank would seek to issue €500 million of new State-backed debt to Quinn’s banks and bondholders.

This would be in return for the lending syndicate releasing the insurer from guarantees provided by the group over its debts, the discovery of which prompted the regulator to move against the firm.

Quinn Group has sought to reassure staff about the business in an internal email on Tuesday. The mail was sent in response to reports that Mr Quinn faced the loss of ownership of his group under a proposed deal being considered with its lenders.

“Whilst the restructuring discussions have taken longer than anticipated I think it is important to clarify that contrary to these reports the board have made no proposal to the banks and bondholders which offers equity in the group’s assets,” said Quinn Group chief executive Liam McCaffrey.

“Our businesses have all performed well in 2010 despite a very difficult economic climate. Our competitive cost base and ability to compete whilst exporting product that in previous years would have been sold in the Irish market, have ensured continued profitability and cash generation.”