Thursday 30 October 2014

Major US fund backs McKillen in hotel fight against Barclay brothers

News of 'critical' American support for businessman comes just days before loan-sale outcome

RONALD QUINLAN Special Correspondent

Published 02/03/2014 | 02:30

Developer Paddy McKillen
Developer Paddy McKillen
The Barclay Brothers
The Barclay Brothers

PROPERTY tycoon Paddy McKillen has secured "critical backing" from a major US investment fund in his epic battle with the Barclay brothers for control of the world-famous Claridge's, Connaught and Berkeley hotels.

Citing several sources familiar with the matter, a report in the US edition of the Financial Times said that Los Angeles-based Colony Capital "has pledged to provide as much financing as Mr McKillen needs to regain control of his indebted empire".

The news of Mr McKillen's tie-up with the US real-estate investment giant comes just days before the outcome of the auction of the Belfast-born businessman's loans by the special liquidator of the IBRC. Code-named 'Project Pebble', Mr McKillen's total IBRC debt has a face value of between €700m and €800m.

While it's expected that the debt attached to Mr McKillen's 36.2 per cent stake in Claridge's, the Berkeley and Connaught hotels will be traded at close to 100 cents in the dollar, potential bidders have said that some of the other debt attached to assets in Ireland, the UK and Boston may be sold at a discount.

The commitment of Colony Capital to Mr McKillen's titanic tussle with the Barclay brothers for the London hotels would appear to have been firmly cemented, with the Financial Times also reporting that the LA-based fund has already refinanced the £55m (€66m) loan extended by the Qatari royal family to the Irishman to participate in a rights offer last year.

The decision by Colony Capital to throw its considerable weight behind Mr McKillen is all the more intriguing given that the company's founder, Tom Barrack, used to jointly control the Savoy Hotel, the company which included Claridge's, the Connaught, Berkeley and Savoy hotels. Having acquired the London hotels in 1998 for $850m, Barrack's Colony Capital and their partners, Blackstone, sold them six years later in 2004 to a consortium of Irish investors assembled by the then high-flying financier Derek Quinlan for €1.1bn.

While Mr Quinlan still retains a 35 per cent stake in Coroin (the company behind Claridge's, the Connaught and the Berkeley), the debt supporting his shareholding is now owned by the Barclay brothers' interests.

Taken together with their direct 28 per cent shareholding, the billionaire owners of The Daily Telegraph currently have effective control of nearly 64 per cent of the hotel group.

Their determination to secure control of Mr McKillen's shareholding has already been made clear with the London-based CoStar News reporting 10 days ago that they had submitted a discounted bid to the IBRC's special liquidators for his debt.

Commenting on the bitter struggle between Mr McKillen and the Barclay brothers for outright control of Coroin, a source familiar with the issue said, "This is a battle of the uglies like you have never seen."

Sunday Independent

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