Business Irish

Sunday 28 May 2017

AIB's insurance didn't cover £56m loss on sale

Courts

Shane Hickey

AN insurance policy taken out by AIB to cover potential frauds did not fully repay the bank after it lost £56m (€64m) by selling a property portfolio involved in an alleged scam.

A bank official yesterday said a settlement had been reached on the loss incurred following the sale of 14 properties which had been owned by Achilleas Kallakis, an alleged shipping tycoon charged with a series of fraud allegations, but it had come to less than the £56m.

Mr Kallakis (43) and his business partner Alexander Williams are accused of using forged guarantees from a reputable Hong Kong property company -- Sun Hung Kai Properties (SHKP) -- to secure loans totalling £740m between 2003 and 2008. Both deny the charges.

The properties were sold to Irish development firm Green Property at the £56m loss after allegations against Mr Kallakis emerged in 2008. Michael Ryan, head of business management in AIB corporate banking Ireland, yesterday told Southwark crown court that an insurance claim had been submitted early last year in relation to the loss and agreed the amount paid out was less than £56m.

He said the agreement had a non-disclosure clause so he could not reveal the full amount.

The sale of the property portfolio to Green Property was 100pc financed by AIB in 2008 through non-recourse loans secured on the properties and with no reliance on individual shareholders.

Mr Ryan said the directors did not have to contribute anything but their expertise.

AIB initially approached Green in October 2008 about the possibility of the company acquiring the properties, which it did so through a series of companies called Kish one through 14.

The rate of interest was on a "low margin" in property lending terms, Mr Ryan said, and AIB stands to gain 30pc of the surplus if the buildings are ever sold at a profit, the court heard.

Action was taken quickly on the sale as there were concerns that some of the buildings were not being managed properly.

The deal took place shortly after SHKP said it knew nothing of the guarantees that Mr Kallakis said he had and which were a crucial part of the financing deals secured from the bank.

Mr Kallakis and Mr Williams have pleaded not guilty to 23 charges of fraud, forgery and money laundering, amongst others.

The trial continues today.

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