Boutique hotel owner claims Anglo will cause his business to fail
THE owner of two boutique hotels in London's Kensington area fears his business will fail if former Anglo Irish Bank-appointed receivers are allowed to sell his properties over €21m in outstanding loans.
Irish citizen, Jalaluddin Kajani, who came here from Pakistan in 1980 and later set up a property company, Supergrace Ltd, says the two hotels and another commercial property in Putney, London, are at the core of his business, run by his wife and family.
Despite having sold several other properties to meet the bank's demand for repayment, if these three assets are sold the company will be unable to continue as a going concern, he claimed in the High Court.
Mr Kajani and the company were yesterday granted an injunction restraining the Irish Bank Resolution Corporation (IRBC), formerly Anglo, as well as receivers Jonathan H Gershinson and Ania Packman, from taking any steps to deal with the three properties, including selling them.
Mr Justice Peter Charleton said he was conscious the application was being made on a one-side only basis but he was satisfied to grant a limited injunction.
The judge noted Mr Kajani complained he had found himself in difficulties because, in order to get refinancing, he had to switch his loans from variable interest rate repayments to a fixed rate of just under five per cent even though rates subsequently fell to between two and three per cent
In an affidavit, Mr Kajani said he was put under duress in 2007 and 2008 by the bank to accept unsuitable terms for refinancing which caused the company to default on repayments.
He first obtained loan facilities for investing in UK properties from (then) Anglo, through its Dublin office, around 2005/5.
In 2007, he decided to buy properties in Kensington and turn them into hotels. He was told by bank Anglo officials that he would have to enter new arrangements, or "swap transactions", in order to refinance.
In November 2007, he agreed the new terms for a sum totalling €18.7m (st£15.2m) but he felt he had to do it under duress. The security for the loans was nine other properties owned by him and his wife.
In March 2008, the loan offer to him was increased to €32m (st£26m), for the purpose of renewing existing loan facilities until March 2009, to allow for a roll-up on an interest shortfall and to purchase two other properties, one in Kensington Road and another at Brompton Road in London.
The March 2008 arrangement included €1.54m (£1.25m)to service existing and future interest shortfalls which, Mr Kajani said, were solely brought about by the 2007 swap transactions he was required to enter into.
Prior to the introduction of these swaps, the company never defaulted on interest payments on its loans to Anglo, and had they not been required, he believed Supergrace would have continued to meet its obligations.
Mr Kajani believed the bank sold clearly unsuitable products which were more for its benefit than for him.
While he knew, in broad terms, the interest rate on the loans was to be fixed at between 1.5 percent and 2.5 per cent above the London Interbank Offered Rate (LIBOR), the mechanism under which swaps operate was not explained to him.
For instance, he was not told of the "astonishing" cost of breaking the swaps, €5.3m (£4.3m) if he had broken them this year.
He didn't immediately enter the 2008 arrangement and as he watched interest rates fall, he asked an Anglo official for advice and was told rates were at a historic low and now (October 2008) was a good time to purchase a swap. He was offered a preferential rate of 4.89per cent but rates fell again and when he tried to pull out, he was told it was too late.
Anglo was nationalised in December 2008 and faced with pressure to reduce his debt he sold off five properties but says this was on the understanding that he would be left with the three prime London properties.
However, despite getting a total of €7.9m (£6.4m), from these sales, the bank issued a demand for repayment of €28m (£23m), later dropping to €21m (£17m) following further property sales.
At the beginning of this month, Mr Kajani learned receivers had been appointed over his remaining properties.