Ormond Quay, the Dublin-based investment vehicle whose difficulties caused the near collapse of the state bank of Saxony, made a gross profit of €7.99 million last year but paid only €250 in tax.
The IFSC-based company has two Irish directors, Dan McGing, the former chairman of ACCBank and George Maloney as directors. Mr McGing declined to comment last night and Mr Maloney could not be reached.
Ormond is a specialised investment vehicle known as a "conduit". These vehicles are highly leveraged and established at arm's length by financial institutions in order to avoid having to reflect their debts on their own balance sheet.
It was one of three conduits managed by Sachsen LB Europe, the Irish subsidiary of Sachsen LB, which is the state bank of the German state of Saxony. The other two are Georges Quay Funding and Sachsen Funding 1. Sachsen LB Europe was established in 1999 and employs about 50 staff at George's Quay in Dublin.
The Sachsen-backed conduits make long-term investments in asset-backed securities, which are bonds based on pools of assets such as residential mortgages. The conduits raise the finance to buy these bonds in the short term debt markets through the issue of IOUs known as commercial paper.
Ormond Quay's problems arose when it was no longer able to redeem its commercial paper through the issue of new commercial paper, due to the turmoil in the global credit markets which have seen investors steer clear of riskier assets.
Ormond then sought financing from Sachsen to be able to pay its debts, but Sachsen LB Europe and its parent Sachsen LB were unable to provide it and the German savings bank association (the Sparkassen-Financegruppe) had to step in over the weekend with a €17.3 billion credit line backed by the state of Saxony. Sachsen said this weekend that as a consequence of the rescue it was in a position to meet its obligations in respect of Georges Quay and Sachsen Funding. "The conversion of the refinancing of the Ormond Quay structure will negatively impact the Sachsen LB annual result," it said.
The 2006 accounts for Ormond Quay show it had investments of €9.29 billion and creditors of €9.32 billion. The gross profit of €7.99 million represented the difference between interest receivable of €217 million and interest payable of €207 million after foreign exchange costs of about €2 million. The company reported a pre-tax profit of €1,000 after charging other unspecified expenses. According to the accounts, its investment adviser is Sachsen LB Europe.
The company has 40,000 ordinary shares in issue, of which 39,994 are held by JP Morgan Corporate Trustee Services.
