Company owned by tech guru Bill McCabe hit with €5.4m ruling
Published 12/03/2016 | 02:30
A company controlled by businessman and tech guru Bill McCabe has been stung with a multi-million euro judgment after a UK High Court ruling in relation to an interest swap agreement.
Isle of Man-based company Millvalley, which is owned by Mr McCabe, has been ordered to pay £4.2m (€5.4m), plus interest to an Irish-registered securitisation vehicle that is controlled by US private equity giant Lone Star.
The ruling arose out of a contested interest rate swap agreement linked to a deal involving Isle of Man companies controlled by Mr McCabe, and which were used to acquire interests in two landmark Scottish department store premises - The Frasers Building in Glasgow, and the Jenners Building in Edinburgh. The Frasers Building is leased to House of Fraser, while the upmarket retailer also operates from Jenners.
Millvalley was one of the special purpose vehicles formed in the Isle of Man to acquire the interests in the buildings.
In 2006, Millvalley entered into an agreement with Anglo Irish Bank for an interest rate swap, which was an interest hedging arrangement required by Anglo in connection with a £33.7m (€43.5m) facility provided by Anglo to Millvalley. The termination date of the swap was November 2016.
In 2010, the Anglo loan to Millvalley and two other Isle of Man companies owned by Mr McCabe - Glen Properties and LNC Developments - were restructured.
In 2011, Glen and LNC sought a further extension of their loan facilities. Anglo Irish Bank agreed to the extension on the basis that Millvalley would sell the Frasers Building and use the proceeds to repay the Millvalley loan facility entirely, and also reduce the amounts owed under the 2010 loan facility to Glen properties.
Most of the Frasers Building was sold by Millvalley in 2011 for £35m (€45.1m) to the Strathclyde Pension Fund, with parts of it remaining in multiple ownership.
Meanwhile, Millvalley didn't want to incur the cost of breaking the original interest rate swap agreement - which would have involved a fee of almost £5.8m at the time. So Millvalley proposed that the original interest rate swap agreement would remain in place after the Millvalley loan had been repaid in 2011, and then used it as a hedge for the outstanding loan facilities at Glen Properties and LNC.
That was agreed to by Anglo, and involved a master agreement regarding the interest rate contract.
Further loan extensions were agreed with LNC and Glen Properties in 2012, and involved a restructured swap agreement.
In 2014, Glen Properties repaid its loan early. IBRC, previously Anglo, then demanded an early termination fee of £4.2m from Millvalley. Millvalley claimed that under the terms of its interest swap agreement with IBRC, because the bank was in liquidation proceedings, that no sums were due.
In September 2014, IBRC assigned its right, title and interest in the early termination amount to LSREF III Wight, a company ultimately controlled by Lone Star.
The Lone Star vehicle then sought the early termination payment from Millvalley.
A London High Court judge has just ruled that the Lone Star vehicle is entitled to the £4.2m.
A spokesman for Mr McCabe said: "A dispute arose about an issue with IBRC and subsequently Lone Star. It has been adjudicated upon by the courts and we will abide with that decision."