Barclays & Quinn Group... Securing a US funding first

It’s not every day that a Belfast-based banker gets the chance to get involved in a $300 million plus funding deal which links one of Ireland’s top companies with the US Private Placement debt capital marketplace.

So it's hardly surprising that Adrian Doran, Head of Corporate Banking at Barclays' Belfast office isn't averse to talking about it.

It was Doran, assisted along the way by London and US-based specialists from Barclays worldwide team, who led one of the most unique and innovative financing deals to impact on an NI-registered company.

The deal, which brought Fermanagh-based Quinn Group into the US Private Placement arena along with a relatively small number of British and Irish companies, was completed back in October of last year alongside an additional syndicated bank finance deal.

The Group, headed by the private and often media shy Sean Quinn, has a myriad of business interests across cement and glass manufacture, quarrying, insurance and hospitality.

Throughout its operations, it employs some 6,500 people. In 2004, the Group had sales in excess of 1 billion euro and this was expected to increase to 1.3 billion in 2005 with pre-tax profits of 270 million.

And that mix of business interests, in the past, meant a mix of banks providing the necessary funding for growth.

“We started to talk to the Quinn Group some time ago about the idea of combining the debt spread around the group in one deal through the holding company,” says Adrian Doran. “We were proposing an unsecured loan – which is relatively rate in Ireland – and a package which would be a lot tidier, easier to manage and would also save the company money.”

The Group, through both Sean Quinn and his CEO Liam McCaffrey, liked the debt re-financing idea, and Adrian Doran was left with the daunting task of putting together one of the biggest banking deals on the island in recent years.

“Quinns tend to take a no nonsense, pragmatic approach to doing business,” Doran adds. “The idea of the US Private Placement market appealed because, at the end of the day, it's a relatively simple concept.”

The market, in a nutshell, is a fairly small group of key US investors (many of them pension and insurance funds) interested in investing long-term in business and industry.

But it represents a fund worth an estimated $40 billion.

“For us, the private placement marketplace was the ideal solution. It lay somewhere between a syndicated finance deal involving a group of banks, and the public bond marketplace…..which is a much bigger step.”

It's the first time that a Northern Ireland-registered entity has gone to the US Private Placement market….although it is understood that another is actively considering mirroring Quinn's financing route.

In the South, both Kingspan and Grafton have been recent beneficiaries of USPP debt funding, and utility company ESB did it some years ago….raising over $1 billion in funding.

“The advantages are clear cut,” says Adrian Doran. “The USPP investors like to look for good long-term investments, and they are all passive investors….to a man or woman. Generally speaking, if a company is hitting its targets, they'll be happy. They're not as hands-on as banks or other forms of investor as a general rule. And, in overall terms, the market represents a low-cost form of high level financing.”

The syndicated loan arranged by Barclays to run parallel is of an undisclosed amount, incidentally.

“We first sat down with Quinns in May of last year, and we set ourselves an ambitious deadline to have the deal done by Friday, 13^th October. We hit that target right on the button and that's something we're very proud of.

“It is a high profile deal for both Quinn Group and Barclays and it was all the more encouraging because both the bank and private placement facilities were over-subscribed and competitively priced. That reflects our expertise and the very strong implied credit rating of the Quinn Group.”

In the run-up to the private placement deal, Doran along with McCaffrey and Quinns Finance Director, Dara O'Reilly, had to embark on the obligatory 'beauty parade' trip to the US to meet with potential investors.

“It's one of those exercises that you have to do as part of the process,” Doran explains. “We flew to New York and then crossed the States talking to investors who had expressed an interest in what we were offering. It was a fascinating experience.”

And it's an area where Barclays global expertise came into play. The bank's New York office has a team of specialists for whom private placements and syndications are an everyday occurrence….and that sort of experience proved invaluable for the Irish fund seekers.

However, the co-ordination of both the USPP deal and the syndicated bank finance deal both came from Barclays small office in Belfast, and Doran's desk and phone in particular.

“Quinns appreciated having someone to talk to as a single point of contact throughout the process. That side of it worked well for both of us,” he says.

Doran reckons that the deal also gets across a couple of key messages to potential participants in this kind of deal. Firstly, that the US Private Placement market isn't the preserve of multi-national PLCs and secondly, the diverse range of businesses in which US investors are interested in..

“Around half of the companies going through the private placement process are private organisations, and funding runs from as low as $50 million to $1 billion and a bit above. Housing associations have been funded, so have insurance companies, so there is breadth as well as depth.”

“There is no reason why more locally-based companies of the right type can't consider tapping into what is an excellent source of long-term finance.”

As for Liam McCaffrey at Quinns, he is clearly pleased with the deal.

“It is of tremendous benefit to the Quinn Group in that it provides an overall corporate facility, whereas we used to finance each new project or acquisition on a standalone basis. In addition, the whole package provides us with simple, cost effective finance.

“It also gives us the flexibility to grow and to develop the business in a controlled manner as our profit levels grow.

“Barclays in general and in particular Adrian Doran were extremely supportive and demonstrated great confidence in our Group,” he adds. “The initial timetable for the deal never slipped, even by one day, which in my experience is rare for a deal of this size and this was due to the hard work and dedication of Adrian and his team and to the work of our Finance Director, Dara O'Reilly, and his team.”

The Quinn Group CEO says that he would have no hesitation recommending the USPP route to other Northern Ireland companies.

“I'd strongly recommend it. Whilst we were initially concerned at the prospect of presenting our business to US institutions, we found all of the people we dealt with to be very capable, well informed on the markets and industries we operate in and very efficient and business-like in processing the transaction.”

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