Saturday 29 November 2014

McKillen calls on Barclay brothers to 'sit down and do a deal' to end battle

Published 09/03/2014 | 02:30

Connaught Hotel
Paddy McKillen
Dir David and Sir Frederick Barclay
Paddy McKillen
Claridges Hotel
Berkeley Hotel, London

PROPERTY tycoon Paddy McKillen has called on the billionaire Barclay brothers to "sit down and do a deal" to end the three-year battle for control of the world-famous Claridge's, Berkeley and Connaught hotels.

Speaking to the Sunday Independent, Mr McKillen insisted any hope the Barclays had of ever gaining full control of Coroin – the company behind the three London hotels – was now gone following the successful acquisition of his loans from the IBRC.

In refinancing his multimillion euro borrowings with the assistance of US real estate investment giant Colony Capital, Mr McKillen headed off competing bids from several rival bidders – including the Barclay interests – and firmly secured his 36.2 per cent stake in Coroin.

Asked what the next step might be in his ongoing war with the hugely wealthy owners of the Ritz Hotel and Daily Telegraph for control of Claridge's and its sister hotels, Mr McKillen said: "There's a number of ways this can be resolved. We've offered to meet the Barclays and agree a buyer for their equity. The obvious thing for them to do is to sit down and say, 'Can we do a deal here?' It's clear now that I'm not for selling."

While the Barclay brothers may not be amenable to such a deal, Mr McKillen believes their hand could yet be forced owing to the circumstances of financier Derek Quinlan, whose 35 per cent shareholding in Coroin they effectively control through the ownership of the debt supporting it.

"When the Barclays wake up every morning they're going to have to check on Derek Quinlan's financial situation. If he has one loan in default or a bankruptcy case against him, then pre- emption on his shareholding in the hotels will start and things will be out of their control. He is in a very fragile financial situation, and that represents a fragile situation for the Barclays and their funders. They [the Barclays] should sit down and do a deal with me," Mr McKillen said.

Asked if he still considered his position as a shareholder in Coroin to be sustainable, Mr Quinlan told this newspaper: "My personal, associated corporate and partnership debts have been reduced by over €3bn in the last five years. My financial position is now stabilised. It was a mammoth task but we started it early and stuck at it. Many doubted it could be accomplished but the hard work and co-operating with my banks made it possible.

"That said, the task continues and I will persist with my efforts to maximise the end return and endeavour to create new value."

While Derek Quinlan may still be in the process of stabilising his finances, Paddy McKillen is satisfied that the agreement he has struck with Colony Capital's chairman and chief, Tom Barrack, puts him in a position of strength in his present battle with the Barclays and beyond.

On this, he said: "My debt is now very firmly secured and it takes away the Barclays' last opportunity to take control. We just snatched that opportunity right out from under their noses. Our deal with Colony puts at our disposal the funds to buy the Barclays out. It's a two-part arrangement I have with them; one is to fund ourselves away from the IBRC and the other is to buy control of the company. The funds are available at a minute's drawdown, so it's a fantastic situation we're in. These people have deep pockets and they love their hotels and they see this as a safe investment."

The arrival on the scene of Colony Capital may yet help the warring sides to consider suing for peace.

Asked if he believed a deal between Mr McKillen and the Barclays was possible given their fraught relationship over the past three years, Colony Capital chief Tom Barrack said: "I am confident and hopeful that these brilliant men will find a solution that benefits their own interests, and most importantly, enhances and enriches the dynastic and timeless hotels which they steward."

That optimism may yet be diminished if the Barclays maintain the position that they gave in a statement last week, following Mr McKillen's acquisition of his loans from the IBRC.

"Nothing has changed with regards to Maybourne Hotel Group [the three hotels], except that instead of being charged to IBRC, Mr McKillen's minority shareholding in Maybourne is now charged to Colony Capital," the statement said.

But whatever happens, it's doubtful Mr McKillen will ever forgive the Irish Government or Nama for the threat he believes they presented to his interests.

"We were let down by the system. We took care of our business. We never borrowed recklessly. We borrowed for assets which we improved and we never went for 100 per cent finance. We have shopping centres like the Jervis and great hotels that have stood the test of time. Both Nama and the Barclays wanted them severely and that has been our biggest problem. But we've come through the other side unscathed.

"Even in this recession, we've contributed €40m a year in interest and taxes. Since 2008, our little office has created 2,000 jobs. We've created 1,000 direct jobs and 1,000 indirect jobs,"Mr McKillen said. "It's remarkable how robust our business has been in the worst recession since 1929."

Sunday Independent

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