Former Irish billionaire declares personal bankruptcy

November 15, 2011 by · Leave a Comment
Filed under: Credit News 

What a misstep on the part of Sean Quinn.  He should of never pledged his entire equity of the Quinn Group to the bank to acquire its shares.  When you took the money from the bank and started buying, you basically locked yourself in at the prices you purchase shares at.  If you don’t acquire the majority stake in the bank, you loaned capital is now at the mercy of the managers of the bank and their board.  In this case, the fix was already baked in so it would not of mattered if he got control of the now failed firm.  It is plain to see what happened next, the bank was leveraged up with toxic real estate assets and as those declines, the shares fell and the bank went under.  Now Mr. Quinn owes a huge note to a failed bank for billions and he owns shares in a bank that is now insolvent.

This is what happens when we use so much leverage in the system.  Companies and people can just explode and leave huge liabilities that hurt the employees and shareholders alike.

Forbes (Edwin Durgy) – Once Ireland’s richest man with a personal fortune of $6 billion, Sean Quinn applied for voluntary bankruptcy in Belfast this morning. Quinn owed an alleged $3.85 billion to Anglo Irish Bank’s successor institution, the Irish Bank Resolution Corporation, which he simply couldn’t repay.

The entrepreneur, once one of Ireland’s most admired businessmen, started out in the early 1970s selling sand and gravel from a quarry on his father’s farm. He eventually built his Quinn Group into a multi-billion dollar mining, manufacturing, real estate and insurance empire.

But it all began to unravel in 2008 with the outbreak of the global financial crisis. At the height of Ireland’s real estate boom Quinn had bought shares of Anglo Irish Bank with risky financial instruments known as contracts for difference that allowed him to amass an apparent 25% stake in the bank, using borrowed money from Anglo. When the property market collapsed, the shares plummeted, becoming worthless when the bank was nationalized in 2009.

Unable to pay his hefty debts to the bank, Quinn was forced to turn over his Quinn Group, itself indebted to Anglo to the tune of $1.85 billion, to the bank in April 2011. At that time, Anglo released a statement stating simply that it was “owed an enormous amount of money by Sean Quinn and his family which they are not in a position to repay. The security on these loans is the family’s equity in the Quinn Group.”

Click to Continue Reading

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!