Quinn Manufacturing debt increased from €385m to €437m during the first six months of 2013, a period when the business incurred losses of €16m.
The value destruction after the bondholders takeover has been immense. In 2010 the business made EBITDA of €110m, using a six times multiplier as an industry average it’s value would have been €660m.
Current year EBITDA is forecast to be a paltry €60m. On the same basis therefore the value has reduced to €360m. Adding in the €100m spent on fees, €400m in value has been destroyed. More is being destroyed every day as the slide in Glass and Plastics has only just started.
With debt well in excess of value how did the auditors sign off the 2012 accounts in June 2013?
It appears in fact that the Quinn divisions had forwarded their reduced forecasts to the executive management team of Paul O’Brien, Paul Donnelly, and Ciaran Leonard in May. Rather than bring these numbers to the attention of the auditors and bondholders they didn’t disclose them until after the accounts were signed off.
Due to the lack of performance the bondholders covenants have been breached, although the bondholders have waived this breach, accepting a promise that changing the name and selling the lorries and garage will turn things around. In doing so they have not reduced the level of debt to a sustainable level, why?
The bondholders have fixed charges ie: first call over the factories, land, machinery, debtors, stock etc…, and if they appoint a receiver they will rank ahead of the unsecured creditors, suppliers, staff, pension scheme, investors in Leonardo property guaranteed by the company, etc…..
In this fashion they can realize much more than they would by a going concern sale. This is the only possible reason for not reducing the debt.
All unsecured creditors and credit insurers you are advised to check out the numbers quoted above and determine whether you agree with this analysis.
Do you get what you pay for?
When you pay a CEO €1,080,000 per year, almost €21,000 per week you expect a business to run in a planned focussed fashion.
Surely it wouldn’t spend €40,000 printing it’s diaries, calendars etc……. for 2014, taking delivery of them during the week then changing its name on Friday and ordering them all over again on Monday.
Competitors must be shaking in their shoes, Dad’s army is on the march.
2 comments:
The simple fact is that Sean Quinn was the architect of his businesses. From nothing he built all of his businesses, the final manifestation being the employment of thousands of people. This takes tenacity, confidence, drive, intelligence and sometimes the somewhat indescribable talents that very few possess.
By comparison and in my opinion Paul O’Brien has never started a business from nothing and built it up, and by factual definition he is wholly unqualified to even contemplate the running of the Quinn Group. He is a man lost at sea and through his own illusions and misdirection was placed in this position by bondholders and senior executives of IBRC (whom it has now transpired as a result of the liquidation of IBRC) who were no strangers to capturing large salaries while relying on significant PR to protect their own self interests while the realities of the institutions/companies they represent were further pushed into the deep abyss of destruction.
It would be hoped that the bondholders would still hold a sense of commerciality and it is without doubt that were they to enter into an arrangement, even at this late stage, with Sean Quinn or his representatives in a debt for equity swap, they would garner a significantly better return, considerably greater than what the current position is. This has been the benchmark throughout the world where the borrowers and lenders have aligned their interests in the best interest of everyone.
I would ask concerned Irish businesses to publish a blog comprising a global framework on how the bondholders and/or the Government could be shown a simple path by the reinstatement of the original executive of the Quinn Group, and by definition the best return even at this late stage for the bondholders and/or the Irish Government.
Well said Ben Hume! Its never too late to do the right thing.
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