The Real Politik behind Quinn Group

Anglo are proposing to pay off the bondholders in QI €550m to ensure that QI stays in the group. The alternative is that QI gets sold for a fire sale price with Anglo last in the queue to get any financial return. That leaves Quinn Group, less the cash cow, owing Anglo €2.8b + whatever has still to be paid to the other banks.

Quinn Group is now insolvent and the carcase gets stripped down and sold for more fire sale prices to the other banks and finally, Anglo get to pick over what's left. Net return on their €2.8b, not an awful lot. In addition we have the politically unpalatable scenario of the Quinn Group collapsing with a large amount of job losses, companies being shut down and the finger of blame being placed on the government.

The alternative that Anglo are proposing is that for another 25% worth of debt in the company (€550m for the bondholders and €150m equity for QI), and bringing the net amount owed to Anglo to €3.5b, they get a controlling interest in the entire group. Sean Quinn remains as chairman, but realistically Anglo will be putting in their own management team.

The thinking behind this means that Anglo are now in a position to sell off the components of Quinn at the most suitable time, using the cash cow of QI to support the areas of the business that aren't functioning. In my viewpoint, this increases their chances of making some money back, and is a better option than the current one, sitting on the sidelines waiting for the vultures to finish off Quinn.

There's also the political aspect behind this. For the current government, failing to save Quinn Group is likely to ferment dissension in their backbenchers, increasing the likelihood of a GE being called at the worst possible time for the governmental parties. It's also highly that the write-off in the debts to Anglo may finally kill off the bank and it will be run down.

I really wouldn't like to be the regulator now, the pressure must be enormous coming from all the interested parties. I do think the opposition should be seen getting involved in what is a critical moment for the State, but they are as hamstrung as the government are in terms of the forthcoming election, and can't be seen to doing anything that will effect their own popularity.

For the record, I do not support the government and have a reputation on the for being ABFF, nonetheless, that doesn't mean that I conveniently ignore the political and financial realism of the current situation.