Anglo Republic: Inside the bank that broke Ireland by Simon Carswell

Author:Simon Carswell [Carswell, Simon]
Language: eng
Format: epub
ISBN: 9780141969725
Publisher: Penguin UK

12. Rounding Up the Golden Circle

July 2008 – Anglo’s value: €4.4 billion

On Friday, 4 July at 2.28 a.m., Drumm, still in the US, sent an email to a colleague at the bank outlining a ‘long and detailed’ conversation he had had with Con Horan at the Financial Regulator. He said that he had informed Horan that the bank’s lending to Quinn had reached €2 billion following the latest loan of €200 million. ‘I told him we are up to 2.2bn but really that nets back to 2[bn] in that the latest 200k [recte €200 million] is just window-dressing as asked for bondholders and cash stays in the group,’ Drumm wrote. ‘I told him that absent the share issue SQ would not be our biggest lending worry given profits and ability to service debt.’ He was simply making the point that Quinn was – or anyway appeared to be – in a healthier financial position than some of the bank’s other big customers.

Drumm referred to a letter sent by Pat Neary, Horan’s boss, on Wednesday, 25 June. Neary said that when Anglo’s loans to Quinn had hit €1.5 billion, the Regulator had told the bank that it did not want to see any further increase in lending to Quinn. In fact, it had asked the bank to reduce its exposure to Quinn, he said. Querying Quinn’s further request for €200 million, Neary asked Drumm whether he considered ‘such a large facility appropriate’.

Drumm felt that Neary’s letter was a classic exercise in ass-covering. The two men were in almost daily contact over Quinn, and Anglo had informed the Regulator about each new loan. In his internal email to the executives, Drumm said that he told Horan the bank was working on a reply to Neary’s letter and that ‘we would go down to talk it thru next week’. Drumm concluded the email by asking whether a copy of the legal advice obtained by the bank from Dublin law firm Matheson Ormsby Prentice on the Quinn transactions could be sent to the Regulator. ‘I already said we would and he [Horan] reminded me,’ said Drumm, ‘plus its [sic] suits that they are party to it.’

Later that day Drumm wrote to Neary, explaining the additional €200 million loan and how he felt the bank was protected by the security it had, based on the value of Quinn’s assets. The €200 million loan, he wrote, would be held on deposit at Anglo.

He told Neary that Anglo’s board and credit committee had agreed to approve the €200 million on the basis that Quinn had assets of €4.6 billion and debts of €3.6 billion. This included the €2.1 billion of debt due from Quinn and a further €200 million that Anglo was willing to lend to him. The group had earnings of €492 million in 2007, which provided enough cover to meet his loan repayments.

Outlining how Anglo would be repaid, Drumm said that Quinn had agreed to sell properties by the end of 2008, from which the

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