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Tuesday 25 July 2017

Developer wins fight over €1.4bn empire

State faces €7m legal bill after bad bank's U-turn

Dearbhail McDonald and Siobhan Creaton

BILLIONAIRE developer Paddy McKillen was last night "delighted" after winning a legal battle to keep control of a €1.4bn global property empire.

But the taxpayer faces a bill of up to €7m after the courts handed him costs in his high-profile dispute with the National Asset Management Agency.

The Government had argued Mr McKillen's loans had to be taken into NAMA because they posed a "systemic risk" to the financial system.

But in an embarrassing U-turn yesterday, NAMA decided not to take over his loans after months of legal wrangling.

It wrote to Mr McKillen and told him some €1.4bn of his loans would not be taken over by the agency.

The reclusive Mr McKillen, whose developments include shopping centres and luxury hotels, had always argued that the loans were performing well.

A spokeswoman said his business had never been healthier and he had paid down a lot of debt since the case started.

It marks the end of a costly and embarrassing process for NAMA, which had already successfully taken over €700m of Mr McKillen's loans.

His court victory could benefit the last remaining batch of borrowers whose loans are due to be transferred to NAMA in the coming months.

There is €2.2bn worth of loans outstanding that NAMA has yet to acquire. Many of these are syndicated loans and relate to 150 separate legal entities.

Crucially, because of yesterday's Supreme Court ruling, the developers now have the opportunity to object to their loans going into NAMA and the agency must apply fair procedures to give them all a hearing.

However, high-profile developers whose €72bn of loans have already been transferred to the agency will not be able to mount a legal challenge based on Mr McKillen's case.

This is because the Supreme Court ruled that legal challenges must be brought around the time NAMA acquires the loans.

In his case, Mr McKillen argued that NAMA had never given him a fair hearing before taking over his loans.

NAMA has now lost the chance to acquire Mr McKillen's loans which were performing well and could have helped make money for the State.

If NAMA is to ultimately make a profit for the taxpayer, it needs the developers' good and bad loans.

NAMA said it had made the decision not to pursue Mr McKillen's remaining loans which have been substantially reduced since December 2009.

At that point they were described by NAMA as being so big as to pose a "systemic risk" to the banking system.

LOANS

However, Mr McKillen has used the time during the court case to rapidly pay down the loans. This year he paid an extra €75m in capital on top of the €95m in interest repayments.

His loans are currently said to be well below €1bn. The bulk of these loans are with Anglo Irish Bank.

"The loans were no longer deemed material in the way they had been in December 2009," a spokesperson for NAMA said.

NAMA was originally defeated last February in the Supreme Court, which found that Mr McKillen should have been given an opportunity to make representations before it took a decision to take over his massive borrowings.

The court also ruled that the decision on Mr McKillen's loans was made before NAMA was officially established.

The media-shy Mr McKillen was not in Ireland yesterday.

The Belfast-born entrepreneur, who is best known for his redevelopment of a former hospital on Dublin's Jervis Street into one of the capital's busiest shopping centres, said in a statement that he and his companies were "delighted" with NAMA's decision.

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