New management at Quinn Group manufacturing cuts debt by €800m

THE NEW management of the Quinn Group’s manufacturing businesses has reduced its debts by €800 million to €475 million, its chief executive, Paul O’Brien, told a conference yesterday.

The group is now 75.1 per cent controlled by its bankers and bondholders. The State-owned Irish Banking Reconstruction Corporation – formerly Anglo Irish – holds 24.9 per cent of this.

Mr O’Brien was appointed last year and runs the group’s manufacturing operations. Its general and health insurance businesses have been sold. He told the annual corporate restructuring summit at the Convention Centre, Dublin, that its new management had secured 2,600 jobs, 1,100 of them in Ireland.

Its debt has been reduced by €800 million and its funding is secured until 2016.

Mr O’Brien also said there had been 16 serious incidents of sabotage and intimidation against the company since the share receiver’s appointment.

Speaking after the conference, Nils Melngailis, a director of financial services restructuring specialists Alveraz and Marshal, said one of the key tasks facing the Republic’s banks was the need to rethink business models in order to compete in the current economic circumstances.

“In that situation, you should not start by looking at where you are, you should start with where you should be,” he said.

The firm has advised the Government and Irish banks on various aspects of dealing with the crisis, and it is currently working with Spain on a mechanism for cleaning out distressed assets from its banks’ balance sheets. Mr Melngailis also suggested that Irish banks needed to recognise that the economy was not going to grow strongly in the near future, but travel along a “flat line”.

Central Bank governor Patrick Honohan told the conference the government’s mistake was that it took on the banks’ losses before knowing what they were.

Mr Honohan said the problem was not recognising the banks’ losses, as the Nama process did this, but in allocating them to the State.

“The government said ‘we don’t care what the losses are, we will take them on’; that was a mistake,” Mr Honohan said.

In his address, the governor told the conference that the broad international conclusion, stemming from research in the east Asia crisis of the late 1990s, was that centralised asset management worked well for restructuring large property companies and portfolios.

However, the banks were best equipped to handle non-property restructuring. He pointed out that the Republic’s approach to the financial crisis mirrored this.

“Nama for the big property loans, the banks for the remaining bad loans, and massive recapitalisation of, and extensive liquidity provision to, the banks,” he said.

But he added the losses destabilised the State’s own finances, limiting its ability to react to the crisis.