How O'Flynn beat off global giant to take back empire
'Delighted' developer just wants to resume running his firms
Published 14/08/2014 | 02:30
Developer Michael O’Flynn has claimed a High Court victory over a global financial giant and retaken control of his property empire.
The Cork-based builder has succeeded in removing an interim examiner from a number of companies tied to his O’Flynn construction group.
In her ruling, Ms Justice Mary Irvine was critical of a subsidiary of US investment giant Blackstone which bought Mr O’Flynn’s loans from NAMA, saying it had not acted with “utmost good faith”.
Speaking to the Irish Independent afterwards, Mr O’Flynn, one of the biggest developers in the country, said he was “delighted” and that he “just wanted to get back to running his business”. The decision is a victory for Mr O’Flynn and is one of the first times an Irish borrower has taken on an overseas investor like this and won.
It also raises questions about NAMA's strategy of selling huge loan books to overseas investors with little or no relationship with the domestic economy.
Carbon Finance bought loans worth €1.8bn that were tied to Mr O'Flynn and his companies from NAMA in May.
Yesterday's court ruling is likely to put the spotlight on the strategy deployed by NAMA to sell off loans relating to big Irish developers. But a NAMA spokesman said last night: "NAMA manages the assets in its portfolio in accordance with its legislative mandate."
Finance Minister Michael Noonan has pushed for the state bad bank to increase the speed at which it is offloading loans and property. NAMA has sought the highest prices for taxpayers, as it is mandated to do.
This case may now force that strategy to be reassessed. Mr O'Flynn and his companies had worked successfully with NAMA for the past four years and is believed to have been up-to-date on their loan repayments.
In light of Blackstone's conduct though, questions will be asked whether the O'Flynn loans should been sold in the manner they were.
At the time it was expected that Carbon would work with Mr O'Flynn but that relationship turned sour.
In July, the US firm moved to have an examiner appointed to the business and removed the O'Flynn directors from companies tied to the O'Flynn Construction Group.
Carbon claimed the O'Flynn Group was insolvent and alleged the group's leaders had not been co-operative.
However, in a damning decision yesterday, the judge said Carbon Finance had not acted in utmost good faith and had not fully disclosed all relevant information to Judge Brian McMahon on July 29 when he had agreed to its application for the appointment of the examiner.
As a result, Judge Irvine reinstated the original directors to the O'Flynn companies, including Michael O'Flynn and his brother John, and removed the interim examiner.
Carbon had a made a number of references to a "lack of access to substantive financial information and a lack of co-operation" from the O'Flynn Group.
"This characterisation was not an accurate presentation of the circumstances," said Judge Irvine, highlighting that Carbon had access to "significant financial information" before it bought the O'Flynn loans from NAMA. Carbon also "created and put before the court an incorrect impression of events" surrounding negotiations between Mr O'Flynn and Carbon, the judge added.
While the decision is a victory for Mr O'Flynn, it is not the end of the matter. Carbon may yet lodge an appeal against the judgement. They will also go to court in October in an effort to formally put the O'Flynn companies into receivership, effectively taking control of the group.
Speaking to the Irish Independent after the decision Michael O'Flynn said: "It's not over yet. I don't see it as a win as such. "I see at as dealing with a very difficult situation in the only way I could. We have worked day night to defend our position to defend the reputation of the companies, my colleagues and co-directors,"
Mr O'Flynn added that he would now work with Blackstone as best he can.
"I've always worked with my lenders and there will be no exception now with Blackstone or Carbon," he said.
Reacting to the decision, Carbon said that it "notes" the ruling. "Carbon continues to believe that all steps taken in the current proceedings were necessary and appropriate in the circumstances and is pleased to note Michael O'Flynn's decision to make an immediate repayment of his personal loans, which it looks forward to receiving," it said.
"Carbon will continue to safeguard its position as a significant creditor of the O'Flynn Group and to do everything to protect the assets of the group and its creditors," it added.
NAMA in numbers
December 2009: When NAMA was founded
800: The approximate number of borrowers whose loans passed into NAMA
2019: The year NAMA is due to close. It is widely expected, however, that it will be wound down before this
€31.8bn: How much NAMA, funded by taxpayers, paid for the loans and assets it acquired
€20.5bn: How much NAMA has raised by selling these loans, assets and other cashraising activities to date
€7.5bn: NAMA’s first major repayment to taxpayers, which took place in December
0: The eventual cost of NAMA to taxpayers, as predicted by NAMA chairman Frank Daly