EDITORIAL : THE INDEPENDENT, IRELAND

 

Bloody day shows no one is immune from downturn

 

Yesterday's appointment of receivers to Sean Quinn's cement-to-insurance empire and to Derek Quinlan's personal property interests made it one of the bloodiest days so far of the post-Celtic Tiger bust. The demise of Quinn and Quinlan dramatically illustrates that no one, no matter how exalted, is now immune from the effects of the downturn.

While interest in the appointment of a receiver to nine of Quinlan's personal properties will be largely confined to property market specialists, the ripples generated by the Sean Quinn share receivership will spread far more widely.

Sean Quinn was a genuine Irish success story. From a 23-acre farm on the Cavan-Fermanagh border, Quinn built a giant conglomerate. His cement business successfully challenged CRH's monopoly. He built up the largest glass-bottle business in the UK and Ireland from nothing.

In 1996, tired of paying over the odds for insurance, he set up his own insurance company, Quinn Direct. It quickly shook up the market delivering huge savings for motorists and homeowners. The Quinn Group also diversified into radiators, health insurance, hotels and property.

The rise and rise of the Quinn Group turned the one-time captain of the Fermanagh Gaelic football team into the richest man in Ireland, with 'Forbes' magazine estimating his net worth at $6bn (€4.2bn). But the truly remarkable thing was that no one begrudged Sean Quinn his good fortune. Despite his enormous wealth he remained an apparently grounded individual and didn't succumb to airs and graces to which the newly wealthy are frequently prone.

Or so it seemed anyway.

In 2007, for reasons that have yet to be adequately explained, Sean Quinn began to accumulate a huge shareholding in Anglo Irish Bank. This was done in secrecy, with Quinn purchasing his stake using contracts for difference, which at the time didn't have to be disclosed, rather than ordinary shares, which did have to be disclosed. This allowed him to build up an effective 28pc shareholding in Anglo without telling anyone.

His timing couldn't have been worse. By the second half of 2007, with Irish property prices already falling, investors began to dump Anglo shares and the price began its steady slide from a peak of over €17.50 in May 2007 to virtually zero when the bank was nationalised just 20 months later in January 2009.

Not alone had Quinn bought into Anglo at precisely the wrong time, he did so with money borrowed from Anglo. By the time Anglo was nationalised Quinn was nursing losses of €2.8bn.

All of which prompts the question: what on earth was Sean Quinn thinking of when he made his disastrous punt on Anglo? What possessed him to put his life's work and the jobs of his 8,000 employees at risk? This was serious risk-taking. Whatever his motives, such foolhardiness sadly tempers the sympathy so many feel for him in his current predicament.

Following yesterday's appointment of a share receiver, Sean Quinn and the Quinn family have effectively been expelled from the Quinn Group. Which, given all that has happened, is how it should be. The priority now must be to preserve as many jobs as possible within the Quinn Group and for Anglo to recover the maximum possible proportion of the €2.8bn it is owed. As Anglo is now state-owned, any losses on its loans to the Quinn Group will ultimately have to be borne by the taxpayer.

So far the omens are good. Quinn Direct will now be owned by a joint venture between US insurer Liberty Mutual and Anglo. This will allow Quinn Direct to emerge quickly from administration and protect the remaining 1,750 jobs.

Meanwhile, by appointing a share receiver, who took control of the Quinn family's shareholding in the Quinn Group, rather than a conventional receiver who would be legally obliged to quickly sell off assets for whatever price he could get, Anglo has ensured that there will be no fire sale. This is good news for the 2,600 people employed in Quinn Group's manufacturing businesses. Yesterday's developments provide the Quinn Group with a breathing space. With the threat of immediate collapse having now been lifted, Quinn workers and the taxpayer can look forward to a slightly less uncertain future.