ANGLO IRISH Bank is seeking to put Quinn Insurance on a sound commercial footing in an attempt to secure the repayment of €2.8 billion owed by Seán Quinn and his family, The Irish Timeshas learned.
Among the proposals being considered is the possibility of the State-owned bank taking over the embattled insurer and guaranteeing the company to secure its future.
The new Anglo management team have sought to protect the State-owned bank’s exposure to the family by engaging with the Quinn Group, its bondholders and other lenders.
Anglo’s loans are secured on the family’s shares in the group and it would rank behind the lenders to the group if it were to collapse.
The lenders fear that failure to address the financial problems at the profitable insurer will damage the wider group, which has interests in cement, glass-making, energy investments, property, hotels and pubs.
High-level contacts between the parties are ongoing as they seek to find a way of restoring the solvency levels at Quinn Insurance in an attempt to overturn the appointment of provisional administrators to the firm ahead of a further court hearing on April 12th.
The insurer, owner of Quinn Direct and Quinn Healthcare, was put into administration last Tuesday on an application to the High Court by the Financial Regulator.
The regulator expressed concerns about the insurer’s ability to meet the liabilities covering its policyholders after it became aware of guarantees made by the insurer’s subsidiaries on €1.2 billion of debts owing by its parent, the Quinn Group.
The guarantees effectively reduced the insurer’s assets by €448 million, pushing it under the regulator’s solvency threshold for how much insurers must hold in reserve to meet potential liabilities.
Among the options being considered is that Anglo take ownership of the insurer by swapping Quinn family debt to the bank for shares in the firm and providing a guarantee from the State-owned bank that would restore its solvency levels.
Such a move would give the State control of the insurer through Anglo but would have to overcome significant regulatory hurdles.
Mr Quinn described the regulator’s action as “one of the biggest errors in the history of corporate Ireland”, saying that it could jeopardise 5,500 jobs. He has said that he had planned to reduce its debt to Anglo by €400 million over three years.
The group’s chief executive Liam McCaffrey said Quinn Insurance was the key to the family’s ability to repay the €2.8 billion to Anglo.
It is understood that Anglo and the group of bondholders and Irish and UK banks – who are all owed a combined €4 billion by the Quinn Group and family – are concerned that the regulator’s move will prevent the repayment of their debts. The group and the bank had no comment.
The Irish Timesrevealed yesterday that Mike Aynsley, Anglo's chief executive, has consulted Minister for Finance Brian Lenihan on the State bank's effort to reduce its significant borrowings to the Quinn family.
Any proposals to restore the insurer’s solvency levels with support from Anglo would require the Minister’s approval. Given that the insurer has about a million customers and the level of debt owed to the State bank, these may be considered.
It is understood that the guarantees of insurer’s subsidiary on the group’s debt came to the notice of the new head of financial regulation Matthew Elderfield following a financial review of the insurer by a London-based corporate restructuring team from consultants FTI.
The bondholders, led by UK bank Barclays, hired FTI to review the insurer’s financial affairs as part of the refinancing of their loans to the group later this year.