Spanish court orders BoI to pay €116m over failed deal
Published 08/06/2014 | 02:30
Bank of Ireland must pay €103.5m compensation – as well as almost €13m in interest – over a failed deal to buy a Spanish shopping centre.
The whopping compensation bill comes after Spain's Supreme Court ruled that the Irish bank had reneged on a deal to buy the Plaza Imperial Shopping Centre in Zaragoza, Spain.
The €360m deal was struck through the bank's private banking arm in May 2007. The Plaza Imperial was to be included in a property fund launched by Bank of Ireland Private Banking later that year, where the bank would offer wealthy clients the opportunity to invest in retail commercial properties across Europe.
Quinlan Private, the private equity firm of the then property tycoon Derek Quinlan, also bid for the shopping centre at the time. However, Quinlan Private lost out to Bank of Ireland – which agreed to pay €360m for the shopping centre. Bank of Ireland's private banking division was to put forward €140m of this money – with the remainder to be financed by the German bank, Hypo Real Estate.
The deal was struck with Spanish developer Procom Desarollos Urbanos and Spanish supermarket Cecosa – the companies behind the development of the Plaza Imperial.
However, the deal ran into trouble in September 2008 when Hypo Real Estate withdrew its offer. Procom and Cecosa were then advised that the finance for the deal had fallen through because of "persistent adverse market conditions and the particular circumstances of the project".
In October 2008, Bank of Ireland wrote to Procom and Cecosa where it explained that it could not go ahead with the deal because one of the pre-conditions of the agreement had not been met. Bank of Ireland then took back the €40m it had already put forward for the deal, triggering legal proceedings from Procom and Cecosa.
Last April, Spain's Supreme Court ruled that Bank of Ireland reneged on its deal to buy the Plaza Imperial Shopping Centre. In its ruling, the Supreme Court upheld a decision made by the Madrid Provincial High Court in December 2011 where the court ordered Bank of Ireland to pay €103.5m in compensation to the vendors – plus €12.65m in interest.
Bank of Ireland declined to comment.
Sunday Indo Business