Anglo Irish Bank Loans for Shares Seen as ‘Last Roll of Dice’

Anglo Irish Bank Corp.’s loans to 16 clients to buy shares in the lender as former billionaire Sean Quinn’s family unwound a derivatives position were a “last roll of the dice,” the bank’s one-time chief financial officer said at a Dublin trial.

“Last roll of the dice or last-chance saloon is a fair summation” of the strategy, Matt Moran testified today, adding that other options for dealing with the stake had been exhausted. Had the Quinns’ position been unwound in a “disorderly” manner, it would have placed the lender at risk of failure, Moran said.

In July 2008, the loans were used by customers, including family of Quinn, once Ireland’s richest man, to buy shares in the bank. The Quinns were unwinding a stake of as much as 29 percent in Anglo Irish built up through a type of derivative as they struggled to finance the position after the bank’s share price plunged.

Former Chairman Sean Fitzpatrick, Willie McAteer, the bank’s former finance director, and Pat Whelan, a one-time managing director of it Irish unit, have pleaded not guilty to charges of having authorized or permitted the bank to give unlawful financial assistance for the purpose of buying shares in the bank.

The bank made loans of about 625 million euros ($856.8 million) to the 16 clients, allowing Quinn’s family to buy a 15 percent equity stake and 10 other clients to take a 10 percent stake.

Anglo Irish rose and fell in tandem with Ireland’s economy. Its loans soared more than 18-fold to 101 billion euros in the decade through 2008, as it financed some of Ireland’s largest property developers during a real estate boom.

The bank’s shares hit a high of 17.85 euros on May 31, 2007, valuing the lender at almost 13 billion euros. In the wake of the real estate crash in 2008, the shares plunged 99 percent. With Anglo Irish close to collapse, the state nationalized it in January 2009, with the bank becoming the first of five of the country’s largest lenders to be taken over by the government.

To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net

To contact the editor responsible for this story: Heather Harris at hharris5@bloomberg.net

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