The Poinciana Fund, an Ansbacher subsidiary, was used to help rescue a fundraising by industrial holding company James Crean in 1994, according to the report of High Court inspectors into the Cayman Island-based bank.
Mr Ray McLoughlin, the chief executive of Crean Group (as James Crean is now known) told the Ansbacher inspectors that the fund became involved after he asked Mr Des Traynor to help him with a rights issue that had gone badly wrong. Many of the company's shareholders had not participated in the £62.8 million (€80 million) fundraising and there was a £21 million shortfall.
Mr Traynor, who ran the Ansbacher offshore banking operation, agreed to place unwanted loan stock with his clients. Mr McLoughlin's brother, Colm, lent £2 million to an Ansbacher-related company called Poinciana Fund to facilitate the deal. The cash was used by Poinciana to buy surplus James Crean loan stock and Mr Colm McLoughlin was due to be repaid by Poinciana when Mr Traynor sold the securities.
Mr Traynor died unexpectedly in the middle of the transaction and Mr McLoughlin's loan to Poinciana was not repaid because the loan stock was never placed with Mr Traynor's other clients. Mr Traynor's death "threw the spanner in the works of what was happening here", according to Mr Ray McLoughlin's testimony.
Mr Colm McLoughlin is involved in the duty-free business in Dubai and was identified by the Ansbacher inspectors as a client of the offshore bank. It was not established when Poinciana repaid the loan but all the loan stock was redeemed by James Crean in 1997.
According to Mr Ray McLoughlin's evidence, James Crean tried to raise £62.8 million in 1994 from existing shareholders. He said that, "despite a lot of marketing effort, we found that not all of the rights were either taken up or sold" at the end of the 21-day marketing period. There was £16 million in loan stock and £5 million in shares unplaced as shareholders declined their rights to subscribe for new shares and loan stock. The surplus securities would have been left with the underwriters, AIB, and the partial failure of the rights issue could have damaged the company.
"I was brought into the frame to see if I could go to the Tony O'Reillys and so forth of this world to see if some of that stock could be placed with private investors," he told the inspectors.
When they asked who told him that Mr Traynor might be worth approaching, Mr McLoughlin replied: "You know, there were a number of people scratching around trying to find names we might approach. It could have been somebody in Davy's."
Mr Traynor "expressed very high confidence" that he could get it done but not within the rights issue time frame.
"I asked my brother Colm if he would make a short-term loan available so that Des Traynor could take up the stock and then place it on or sell it on to his clients shortly afterwards," he said.
In the end, Poinciana only took up £2 million of the unwanted shares because buyers were found for the other £19 million.
According to Mr McLoughlin's evidence, his brother had been an investor in James Crean since the early 1980s and obtained loans from Guinness & Mahon and Ansbacher to buy shares in the company. The shares were held through a series of Ansbacher-related vehicles.
The inspectors said they had some doubts over whether Mr Ray McLoughlin and not his brother was the real owner of one of these vehicles, called Selima. However, they accepted evidence given on oath by two former Guinness & Mahon officials that they believed Mr Colm McLoughlin to be the beneficial owner of Selima.
James Crean was set up in the early 1970s and, for a time, was a very successful industrial holding company. It has encountered difficulties in recent years and, in July last year, Mr McLoughlin took the company private when he bought out the other shareholders for €12.2 million.
