BY CONVERTING his contracts for difference (CFDs) holdings in Anglo Irish Bank into shares, billionaire Sean Quinn has ended more than a year of head- scratching among market commentators about the size and cost of his stake in the State's third-largest bank.

There have been much talk in recent months that the Co Fermanagh billionaire was preparing to convert his interest in Anglo into actual shares. He and his family are "unwinding" their CFD positions and are taking a stake of almost 15 per cent in the bank.

Quinn has said he is willing to sit on the shares for the long term, believing there is "significant opportunity for capital growth".

It has been quite a roller- coaster ride for Quinn, who, together with his family, will be the largest shareholders in Anglo.

It emerged early last year that Quinn was holding about 5 per cent of the bank through CFDs, a popular but high-risk way of investing in a listed company without actually owning shares or having to declare publicly an interest in the stock.

This was all well and good as the bank's stock rose to its peak of €17.85 in May 2007. The businessman is thought to have built much of his stake last year at share prices of between €13.25 and €17.

Given that Anglo's market value has fallen from €11 billion to €3.6 billion since then, valuing Quinn's stake at €540 million, he is nursing losses of at least €500 million and perhaps as much as €1 billion.

While these are paper losses - and as a long-term investor Quinn is unlikely to realise them into actual losses - he will have felt the pinch of the dreaded margin call on his CFDs.

CFD investors must put a margin - an upfront cash deposit - of at least 10 per cent of the value of the stake and borrow the rest.

As share prices started to fall amid the financial crisis, Quinn would have been called on to pony up extra cash, probably tens of millions of euros, to top up his CFD account to offset substantial falls in the underlying shares.

CFD providers have been demanding more cash from investors, so Quinn could well have faced more margin calls this year as Anglo's share price fell 56 per cent to its current level of €4.75.

This may have been a greater motivation for Quinn's conversion than a willingness to protect the bank's share price against the bogeymen of the Irish banking sector - short-selling hedge funds.

However, the removal of such a large tranche of shares that could be used for short-selling purposes will help the bank, though short-sellers reported that the stock was still readily available at the same borrowing costs.

Quinn, whose fortune is worth an estimated €4.6 billion, seems happy to sit on massive paper losses.

He has made no secret of being a fan of the bank, saying in a rare public speech last year that he was "very proud" of Anglo.

He clearly sees the current share slump as temporary blip. However, his pride in Anglo has been at a substantial cost.

Despite the losses, he is keeping the faith.