End of an empire as Tony O'Reilly considers bankruptcy in Bahamas
FORMER billionaire Tony O'Reilly is facing the prospect of bankruptcy as banks that stood by him are poised to break ranks to chase his debt-free assets.
The Irish Independent has learned that Ireland's once richest man, who faces a forced sale of all his secured and debt-free assets to satisfy a €22.6m debt owed to bailed-out AIB bank, is considering the possible option of bankruptcy in the Bahamas, where he now lives.
The 78-year-old is currently in France, considering his options up to and including bankruptcy.
The possible nuclear option comes after a legal action by AIB led to the effective collapse of a "standstill" agreement that he had negotiated with eight domestic and international banks to whom he owes almost €200m.
He is now moving to sell the "jewel in his crown" – his Castlemartin Estate in Co Kildare – to try to discharge most or all of the debt owed to the state-owned lender.
The businessman was yesterday refused a six-month grace period by the Commercial Court in Dublin on the registration and execution of a €22.6m court judgment awarded in favour of AIB.
Last Monday, AIB claimed that Mr O'Reilly, who wants his debt-free assets distributed to his creditors on an equal basis, proportionate to his liabilities, is insolvent.
The insolvency claim was not disputed by Mr O'Reilly, who said in court papers that in the course of his dealings with all of his creditors he was "anxious to ensure equal treatment" as between all the lenders.
State-owned AIB strenuously objected to a six-month grace period preventing it from pursuing assets he owns outright – with no loans attached to them – despite pleas by Mr O'Reilly that this would have "potentially enormous" consequences for him.
Yesterday, High Court Judge Mr Justice Peter Kelly refused a six-month stay and he also refused a three-day delay sought by Mr O'Reilly to make certain arrangements.
In an extensive written ruling, Judge Kelly said AIB had the right to be first in the queue of creditors, having secured the judgment, and it would be prejudicial to the bank to prevent it from exercising its legal rights.
The refusal of the stay on AIB's pursuit of Mr O'Reilly's unencumbered or debt-free assets means that his lenders will be pitted in a race against AIB to protect their financial positions.
The banks, including ACC Bank, Bank of Ireland and Ulster Bank, are now set to break free from the "standstill" agreement which would have seen the proceeds from the sale of Mr O'Reilly's debt-free assets distributed on an equal, proportionate basis.
Mr O'Reilly cannot be adjudicated a bankrupt in Ireland as he is not resident here.
And he cannot seek an arrangement under Ireland's new insolvency laws as the values of his secured debts exceed €3m.
In his ruling, Judge Kelly said that on the evidence before him, Mr O'Reilly's encumbered (secured) assets would "probably" not even meet AIB's claim, less than 12pc of Mr O'Reilly's overall borrowings.
By close of business last night, fresh letters of demand had not been placed on Mr O'Reilly. But several lawyers maintained "watching briefs" during yesterday's ruling by Judge Kelly and his creditors – who have security for their loans – are expected to seek priority for the debt-free assets.
The ruling could prove to be a mixed victory for AIB.
It is first in the queue as a secured debtor with a formal court judgment.
AIB's loans are secured over 237 acres and the gate and caretaker lodges at Castlemartin; Shorecliffe House and lands at Glandore and almost nine million shares in INM.
But the bank does not have security over the entirety of the Castlemartin Stud lands – some 750 acres – the remainder of which is secured to other creditors.
As part of his efforts to secure an orderly and "structured" distribution of his assets, Mr O'Reilly had offered Castlemartin in its entirety to AIB, including a church and burial ground where his parents and two grandchildren are buried.
Yesterday, AIB said it could not accept a three-day grace period until next Tuesday as it wanted to register judgment mortgages over lands at Castlemartin over which it does not hold security.
However, even if the entire estate is sold, AIB will be second in the queue in respect of outstanding lands over which it has no security, according to those familiar with the matter.
In the wake of the ruling, business tycoon Dr Michael Smurfit praised the contribution that Mr O'Reilly made to Irish business.
He singled out the development of the Kerrygold butter brand by Sir Anthony when he was at the helm of Bord Bainne.
"We must not be forget the very significant contribution he made to the Irish economy," Dr Smurfit said yesterday at an Irish Exporters' Association lunch in Dublin.
In his 30-page ruling, Judge Kelly said "ample" opportunity was given to Mr O'Reilly and two companies of his to pay debts of €22.6m and €23m respectively to AIB and they were not entitled to further forbearance from the court.