THE QUINN Group may move this weekend to serve legal papers on the Financial Regulator in a bid to halt a High Court hearing on Monday to put its subsidiary, Quinn Insurance, into full administration and avoid the collapse of the wider group.
In such a scenario, the regulator would be forced to seek time to reply to Quinn’s defence in a move that could prolong the provisional administration by weeks, buying Quinn Group time to find an alternative.
Any challenge by the insurer to the regulator’s attempt to proceed with full administration would lead to an adjournment to allow preparations for a full hearing.
A meeting between Anglo Irish Bank and the regulator on the bank’s alternative rescue plan for Quinn ended yesterday with the regulator maintaining “a hard line” on its concerns about the banks proposals.
The regulator is understood to be open to proposed alternatives to full administration of Quinn Insurance but believes there are significant hurdles facing Anglo’s plan as it stands.
The regulator is keen to proceed with Mondays court hearing to confirm the appointment of administrators in the belief that it would be the better outcome for Quinn’s 1.3 million policyholders and the bank could then deal with the administrators. Anglo is opposing the administration as it fears this would lead to the disposal of the profitable insurance subsidiary at a firesale price, the toppling of the wider group and a default on the Quinn family’s €2.8 billion loans to the bank.
Crunch talks between Anglo and the lenders to the group – US bondholders and a syndicate of Irish and UK banks – are continuing this weekend as the bank attempts to secure agreement amongst the lenders for its rescue plan ahead of the court hearing.
The Department of Finance is understood to be pushing Anglo to progress a plan to find the best commercial outcome with the least financial impact to the State-owned bank.
Anglo is seeking a 30-day “standstill” agreement to allow it devise a solution that avoids a possible collapse of the group which owes a further €1.3 billion to about 20 US bondholders and a syndicate of banks.
Provisional administrators were appointed by the court last week at the request of the regulator who expressed “grave concerns” about how Quinn Insurance has been run.
The regulator was concerned the insurer had fallen below the regulatory solvency levels on how much an insurer must hold in reserve to cover potential liabilities on policies.
Anglo wants to take control of the Quinn group, restructure debts totalling €4 billion owing by the group and family, and put in a new management team to run the insurance company and boost its solvency to allay the regulator’s concerns. It is understood the bank would prefer that the group’s founder Seán Quinn have no future role after any restructuring. However, to secure his co-operation for the rescue plan the bank believes it may be necessary he remains on as non-executive chairman and the family retain an interest in the group.
Anglo is also keen to avoid outright ownership of such a large conglomerate which would carry significant additional risks for the bank. It has proposed to take control of the group through options or warrants giving it outright ownership if Mr Quinn failed to co-operate and meet certain conditions.
Anglo has also proposed to inject €150 million to raise the solvency ratio at the insurer and to buy out the groups €600 million debts to about 20 US bondholders, swapping the loans for about €550 million in Government-guaranteed bonds.
Statements by Mr Quinn and the group defending its position in recent days were described as “unhelpful” to Anglo’s attempts to secure the regulator’s approval.
The regulator believes the banks rescue plan faces major obstacles as it would have to secure approval from the European Commission.