Belfast Telegraph

US investors are holding all the cards on Sean Quinn

Richard Curran on why Sean Quinn's bid to win back a share in his former empire is unlikely to succeed, despite his consultancy role

There is little doubt now that a split has emerged between former billionaire Sean Quinn and the management team that helped buy back a chunk of his former businesses in the Ballyconnell/Derrylin area.

Quinn returned to the company as a consultant after the cement, plastics and packaging businesses were bought in late 2014. A consortium of three international investment funds backed by a management team made up of former Quinn executives and local businessmen bought them for €98m (£77.7m) from the old Quinn Group.

When the local consortium bought out the business, backed by US funds, there was a belief in some quarters that they were very much in Sean Quinn's camp.

Some thought they would simply sell the business to him at some point in the future. Quinn is neither a director nor shareholder in the business, but is paid €500,000 (£396,000) as a consultant. The Quinn family confirmed that the businessman is in talks with the three US investment funds regarding his concerns about protecting the company and jobs in the area. This is a different way of saying, he isn't happy with how things are being run.

It has been reported that his advisers told management they would like Quinn to be a shareholder. This breakdown in relationships has happened at a time when there has been a rise in reports of intimidation and criminal damage to parts of the former Quinn business.

The Quinn family once again condemned all negative activity in the area. Sean Quinn has previously condemned attacks in the area, saying it was not being done in his name.

It is far from clear what Sean Quinn can do to get back on the share register of his former business. He would have to buy out the US investors. Having just come out of bankruptcy, he would have to raise the money from banks and may not be a bankable proposition for that.

His family retain what is believed to be sizeable wealth, but that is tied down by the courts pending the outcome of complex legal action by IBRC against the family and counter legal actions against the state. They cannot reduce assets below certain levels pending the legal actions.

If Sean Quinn wants to buy or control a single share in that company, he cannot do it without permission of the US investors. The local management have day-to-day control of running the business but not votes at the board meetings and are completely tied down.

The former Quinn group, renamed Aventas, has been breaking up the old Quinn businesses through sell-offs. Accounts show it sold the cement and plastics business to the investors for €98m and made a loss on disposal of €31m (£24.5m). It sold the radiators business for just €3m (£2.38m) after clearing its debts of €21m (£16.6m). It sold the glass business for €410m (£325m), which included €347m (£275m) of debt and €63m for the equity. It sold its stake in Laya Healthcare for €22.4m (£17.7m) and Gortmullan Energy for €7.5m (£5.95m).

At the end of 2014 it still had outstanding debts of €549m (£435m), having repaid €373m (£295m) to lenders.

The financial hit here has been substantial, as Aventas management tried to operate and break up the group in the face of dozens of incidents of arson, intimation and sabotage. Aventas chief executive Paul O'Brien may have been well paid, receiving €1.3m (£1.03m) in remuneration in 2014, but had his car set on fire outside his home as he slept.

The Quinn saga still has several turns to take. Will a new government sanction a settlement of outstanding litigation? Can Quinn raise the money to buy out some or all of the former cement business from the US investors?

The US funds will want a premium on what they paid. But, if the current spate of incidents continues, there may not be many other willing buyers.

Undoubtedly the recent spike in intimidation cuts the number of potential buyers and the value of these companies. Not everybody is ready to risk millions with that sort of trouble.

How long can Quinn remain a €500,000-per-year consultant to the business if relations with the management team have turned sour? Compromises could be found, but given how the business is structured, the US investors hold all the cards.

Belfast Telegraph