Anglo trial told of pressure on Quinn to keep shares

Seán Quinn: Faced demand for €500m one month.

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By Seán McCárthaigh
Irish Examiner Reporter

Details of the financial pressure faced by the Fermanagh entrepreneur were revealed during the trial of three former Anglo executives, including its chairman Seán FitzPatrick, at the Dublin Circuit Criminal Court yesterday. 

The jury heard how brokers were making regular margin calls on Mr Quinn because of the falling price of Anglo shares. In November 2007, Mr Quinn faced a demand for €150m and one for €500m the following month. 

Mr Quinn had built up his interest in the now defunct bank since 2006 via an investment vehicle known as a contract for difference (CFD), whereby he did not actually own the shares. 

Former Quinn Group chief executive Liam McCaffrey said Mr Quinn had begun to run out of funding from group resources in late 2007, while the margin calls on Mr Quinn had become “extreme” by March 2008 due to the collapse of the Bear Stearns bank. Anglo shares also fell by 20% at the same time. 

Mr McCaffrey said Mr Quinn had been meeting the demands by using the group’s surplus cash and raising finance from its banks and bondholders. 

By June 2008, however, Quinn Insurance had required a cash injection of €200m in order not to breach financial regulations. The insurance firm had loaned €300m to other Quinn companies to meet margin calls in early 2008. 

Mr McCaffrey said Anglo was prepared to lend Mr Quinn the money on condition they got control of his CFD portfolio. 

He outlined how his former employer tried to resist pressure from Anglo to unwind his CFD position in the bank because of his belief Anglo’s share price would recover. The share price peaked at €17.53 in June 2007, falling to €0.17 by December 2008. 

The court heard how Mr Quinn had “a difficult and angry conversation” on the phone with Anglo chief executive David Drumm in July 2008 — a time when his overall borrowings from the bank were €2.4bn. 

Mr Quinn subsequently realised he had to comply with the bank’s wishes as Anglo was his group’s major lender, said Mr McCaffrey. 

He said Mr Quinn agreed to a plan whereby he and his family would actually buy 15% of shares in Anglo and place the other 10% on the market. 

Asked by counsel for former Anglo executive Pat Whelan if Mr Quinn was enamoured with CFDs, Mr McCaffrey replied: “Clearly it ended up that way.” 

“I can’t really answer that” was his response to the query as to whether Anglo and his employer were “joined at the hip”. 

Mr Quinn is expected to give evidence today.