High Court grants Quinn permission to retain merchant bankers

The High Court has granted Quinn Insurance and the administrators appointed to the group permission to retain the services of merchant bankers Macquarie Capital Europe Ltd to advise them in any prospective sale of the group.

The Court also approved the costs to date incurred by joint administrators Michael McAteer and Paul McCann of Grant Thornton, who were appointed following an application to the High Court by the Financial Regulator last March.

Today the President of the High Court Mr Justice Nicholas Kearns said that he was satisfied to grant liberty to the administrators and the Quinn group to retain the merchant bankers as advisors.

The court's decision permits both the directors of Quinn Insurance group and the administrators to engage the firm, which is part of the Australian-based multinational Macquarie group, in its attempt to sell the troubled insurance giant.

The Judge also stated today he was satisfied to approve the administrators' own legal and public relations costs incurred to date after independent professionals indicated in affidavits to the court that such costs were "fair and reasonable."

Bernard Dunleavy Bl for the administrators told the court that tenders to advise Quinn Insurance in any sale of the whole or part of the group had been received from three merchant banking firms. While negotiations have taken place the administrators and Quinn Insurance required the permission of the court in order to retain Macquarie's services.

Counsel said that Macquarie Capital's proposal was deemed as the most favourable, although the terms of a final agreement had yet to finalised.

Counsel further stated that the administrators wish to be transparent and place in the public domain the level of fees that may be paid to Macquarie for their services.

However Counsel said that "as a matter of commercial sensitivity" the fees paid to Macquarie Capital should not be revealed "in advance of any successful outcome" for the group.

The administrators sought also the approval of the costs of some €565,000 for their work between March 30 2010 and April 30 2010 and want liberty to invoice the company monthly up to the end of July in respect of their fees for sums not exceeding €1.8m.

In a report furnished to the court last month the administrators want to pay their solicitors some €120,000 for work between March 30 and April 30 last and liberty to pay further legal costs.

They were seeking court approval to pay Hume Brophy PR Consultants some €50,000 for work carried out between March 30 and April 30 last, plus approval to pay the firm €10,000 per month for work from May to July 2010.

The Judge had previously requested independent material on which he could assess the level of costs sought. The court received affidavits from professionals Mr Bernard Somers, an experienced insolvency practitioner and Ms Ita Gibney of Gibney Communications who expressed their views on the costs of such work.

Mr Dunleavy said today that Mr Somers had indicated that both the administrator's and the solicitors fees had charged "standard hourly rates" to deal with what were a broad range of issues following their appointment to Quinn insurance.

Counsel said that Ms Gibney stated in her affidavit that PR costs were on the "lower side" of the market standard given the high profile nature of the work they undertook on behalf of the administrators.

Mr Justice Kearns said he was prepared to approve fees incurred to date. However the Judge said that at this stage he was not going to approve any future costs incurred by the joint administrators. The Judge said he was not prepared to approve any costs going forward because of the uncertainty over what those costs might be.

The Judge, who said that he did not see the need for ongoing PR services, said that any application by the administrators to approve costs incurred after yesterday should be made to the court at a later stage. The matter is due before the court at the end of next month.

The Financial Regulator put the insurer into administration after his office discovered in March guarantees had been provided by Quinn Insurance subsidiaries as far back as 2005 on Quinn Group debts of more than €1.2bn.

The Regulator said the guarantees reduced the amount the firm had in reserve to protect policyholders against possible claims, putting 1.3 million customers at risk.

An investigation into breaches of insurance regulations was launched after the joint administrators were appointed. The regulator is examining breaches of solvency rules and the conduct of individuals in failing to disclose the guarantees, as well as systems failures at the company.