Wednesday 16 August 2017

Developer McKillen unable to pay back key loans in €2.1bn portfolio, says AG

Tim Healy

THE ATTORNEY General told the High Court yesterday that developer Paddy McKillen had exposures of €2.1bn to participating institutions in the National Asset Management Agency (NAMA).

He was also unable to repay certain loans which had expired. It was "an inescapable fact" that those loans were impaired and non-performing, Paul Gallagher said.

Mr McKillen had not given a date when he could pay the €2.1bn and one did not need to be an expert to see the risk involved, Mr Gallagher said.

NAMA could not be held up because Mr McKillen wanted a "reasonable" time to try and secure refinancing which he had so far failed to obtain.

As a matter of law, Mr McKillen had to repay loans which had expired, and on his own testimony he could not, Mr Gallagher said. "What else is that but impaired?"

The fact there was "forbearance" by banks toward Mr McKillen was not relevant as banks had not wanted to write on their balance sheets that loans were impaired, Mr Gallagher added. It was "quite amazing" that experts for Mr McKillen did not address these matters in their evidence.

The Attorney General, who drafted the NAMA Act 2009, was continuing submissions for the State in opposing the action by Mr McKillen aimed at preventing the transfer of his loans to NAMA.

Implications

The case relates to Mr McKillen's Bank of Ireland loans -- which he estimates at €211m but NAMA puts at €297m. But the outcome has implications for Mr McKillen's entire €2.1bn loan portfolio with the five participating institutions in NAMA. That portfolio includes €800m of loans with Anglo Irish Bank.

Yesterday, Mr Gallagher completed a forensic analysis of the NAMA Act and then addressed a range of matters in affidavits for both sides, including testimony from experts for Mr McKillen that his loans were performing and should not be acquired by NAMA.

Mr Gallagher said it was "of very serious concern" that there was non-disclosure "of a material kind" by Mr McKillen of matters about his borrowings when he initiated his challenge to the takeover of his loans by NAMA. Even before NAMA came into being, some of Mr McKillen's loans had expired.

The "elephant in the room" was that while his experts were saying Mr McKillen was a good borrower with just "technical defects" in some loans, if a loan had expired there was an obligation to repay and that had not been done.

Mr McKillen also initially said none of his loans were development loans when that was not the case, according to Mr Gallagher. He had also failed to disclose breaches of loan covenants and had not secured refinancing for some loans.

After NAMA pointed out these matters, Mr McKillen had asserted, in a second affidavit, that loans often reached their expiry date and were extended by agreement with the banks before or after expiry, Mr Gallagher said.

Mr McKillen had said it would be "contrary to good banking business" to "simply call in a performing loan" because of a "temporary loan-to- value issue" or because the loan had reached maturity. The case continues on Tuesday.

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Irish Independent

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