Saturday 19 August 2017

Commission set to probe FitzPatrick's loan top-up

Shane Phelan and Michael Brennan

AN investigation may be launched into a multimillion-euro loan extension given by Anglo Irish Bank to a French property company co-owned by its disgraced former chairman Sean FitzPatrick.

The secretary-general of the Department of Finance, Kevin Cardiff, said the loan deal could fall within the scope of the Commission of Inquiry into the banking crisis.

He made the comments at the Dail's Public Accounts Committee (PAC) yesterday after the Irish Independent had revealed how the company, SCI Saint Roch, was allowed to increase its borrowings from Anglo on January 21, 2009 -- the very day that the bank was taken into state ownership.

The firm, owned by FitzPatrick and corporate financier Angela Cavendish, was involved in the purchase and renovation of a villa on the French Riviera.

The refinancing deal allowed it to increase its borrowings from Anglo to €17.2m -- just a month after Mr FitzPatrick had been forced to resign from the bank over a directors' loans scandal. It was completed without the knowledge of Finance Minister Brian Lenihan.

PAC chairman Bernard Allen described the deal as "GUBU stuff" and said it raised concerns that Mr FitzPatrick had been using the bank as his "own personal piggybank".

Mr Cardiff claimed that he was not aware of the full details but said the revelation was precisely the sort of thing that could be investigated by the Commission of Inquiry.

Borrowings

He also indicated that the loan could be a sign of a broader corporate-governance problem in Anglo.

"In relation to the nationalisation of Anglo Irish Bank, the Government did it in the knowledge that there were practices that it wasn't comfortable with," he said.

"That would just imply those issues were to the fore to the very last minute. That would reinforce the Government's view that there were governance issues."

Mr FitzPatrick's company used borrowings from Anglo to buy the villa in the exclusive Saint Jean Cap Ferrat area for €10.25m in May 2007.

However, within a year-and-a-half, he was having difficulty servicing his portion of the loan and talks began with Anglo on a refinancing deal.

This involved a €2.6m loan being added to an existing €14.6m loan given by Anglo. In return, Ms Cavendish took over full liability for the company's borrowings.

The villa is now on the market at a price of €20m.

The €2.6m portion of the loan deal was given on an interest roll-up basis. That means this portion of the loan does not have to be paid back until the company manages to sell the villa.

The interest roll-up clause is similar to ones attached to many of the loans that Mr FitzPatrick got from Anglo.

The arrangement meant that he did not have to pay interest on some loans in monthly instalments, as would have been the case had he taken out standard person loans.

However, it greatly increased the scale of Mr FitzPatrick's debt and was a contributory factor to him being declared bankrupt two weeks ago with liabilities of almost €150m.

Irish Independent

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