ANALYSIS:Official assignee facing gargantuan task to unravel FitzPatrick's intricate financial web, writes SIMON CARSWELL,Finance Correspondent
SCAN THE hefty independent accountant’s report prepared for Seán FitzPatrick’s bid for bankruptcy protection and the scale and spread of the investments made by the former Anglo Irish Bank chairman will take your breath away.
The report is a fascinating snapshot of the financial affairs of a man once regarded as the poster boy of the Celtic Tiger, a one-time multi-millionaire who was tapped for equity investments for many of the high-profile transactions that were feted during the boom years.
However, the economic collapse and banking crisis has shown his financial empire to be built on sand, dependent on the high value of shares – particularly bank stocks and his stake in Anglo, the bank he built to a market value of €13 billion – and an array of property investments.
Figures in the report show he has lost at least €46 million on investments made as far back as September 1998. In addition, his 4.9 million Anglo shares, worth €50 million in June 2008, are worthless after the bank was nationalised in early 2009. The value of his property investments and other financial stocks have also plummeted in the crash.
FitzPatrick told creditors last week that he accepted “full responsibility for my own ruin, personal and professional”. He had used his “best judgment” in making investments, he said.
Facing liabilities of €147.9 million (on which his lenders have security for €77 million) and with assets worth €51 million to service them, the High Court declared FitzPatrick bankrupt. He joins a small but fast-growing group of heavily debt-laden individuals who will lose control of their financial affairs to a court officer.
The court’s official assignee faces a gargantuan task managing and liquidating investments all around the globe for the benefit of FitzPatrick’s creditors.
Many of the investments are in complex syndicates with other investors, in some cases held for long-term returns on landmark properties that will prove difficult to sell at a profit any time soon.
FitzPatrick’s large web of investments was woven by easy access to finance as a former chief executive of Ireland’s fastest growing bank and through his close contacts with high-profile businessmen, dealmakers, and property developers/investors.
Anglo was regarded as an entrepreneurial bank willing to back investments. Judging from the assortment of assets, FitzPatrick not only banked them but participated as an investor.
“It very much seems like he was a good guy to call because he would also take a piece,” said a source with knowledge of FitzPatrick’s investments.
“Seanie would be the first port of call but unfortunately it was not his money to spend.” It was like he had a “piggybank within a bank”, said another financial source.
FitzPatrick’s creditors were told last week that his lending was not limited to Anglo. He had access to as much as €100 million in credit facilities, on top of the €110 million he drew down from the now State-owned bank.
Most deals were bankrolled by Anglo but he also borrowed from Bank of Scotland (Ireland), Friends First, Ulster Bank and EBS building society.
“He was a deal junkie,” said one Dublin businessman who received a small investment from him.
“When it’s that easy to get money, it’s hard to say no and not do deals, but at the peak of the market three or four years ago everything looked great, offering 20 per cent annual returns.”
How things have changed. Not only has FitzPatrick seen a large part of his investment portfolio wiped out but he also faces further problems through potential liabilities on guarantees and other contingent liabilities which will now be crystallised after being declared bankrupt.
He invested in an array of companies through Cove Capital, the venture capital firm run by close associate, Lar Bradshaw, a former non-executive director of Anglo. The companies included Mao restaurants which went into receivership this month, and an Irish pub-themed chain in the US called Great Irish Pubs Florida.
The report by accountants O’Connor, Kelliher Treacy based in Killarney, Co Kerry, shows that FitzPatrick has lost more than €4 million on his Cove Capital investments, but he and his fellow investors jointly face potential liabilities of €18 million.
“Some of these investments have completely failed with all equity gone, whilst others range from neutral to modestly successful,” say the accountants.
“These are private companies, realising value quickly may be extremely difficult. Overall the investment would appear to be very illiquid and on that basis Mr FitzPatrick considers a nil valuation in this instance.”
This is a theme running through the report – the nature of his investments, particularly in property, make them hard to value or sell as there is currently little or no market value for them.
FitzPatrick was a regular participant in high-profile property deals involving large syndicates of investors backing substantial property transactions.
He invested in four deals with Quinlan Private – now Avestus Capital – the property firm set up by Derek Quinlan, as well as a commercial property in New York in a deal organised by Dublin firm Warren Private Clients.
A number of syndicates in which he is a participant have encountered difficulties as a result of being banked by Anglo.
D2 Private, the firm set up by David Arnold and Deirdre Foley, told FitzPatrick last April that his investment in an office block in London’s West End had fallen in value and that Anglo was putting pressure on the firm to sell the building as its loan-to-value covenant had been breached by the drop in its value from £191 million in 2007 to €180 million.
FitzPatrick also took a punt on businesses outside property. He invested in a Dublin firm Rub Edibrac, a niche engineering business which made “tungsten carbide burrs” for use in the aerospace, power generation, defence and medical industries.
While he put most of his nest eggs in property and bank shares , FitzPatrick also spread money overseas but largely in property.
One exception is an asset off the African coast. Anglo is locked in a dispute over the valuation and security on a Nigerian offshore oil field in which he invested with Bradshaw. His share in the oilfield, which FitzPatrick valued at €14 million, is his most valuable asset, though its worth is disputed. As for many of his other foreign assets, their value has also fallen sharply. Little has emerged unscathed from the crash.
Balance sheet bottom line
Liabilities€147.9m
Assets€51.2m
Deficit96.7m