Ireland's corporate reputation in US hit by 'delinquent' bank case
Published 21/11/2010 | 05:00
Ireland's corporate reputation in the US has been dealt a serious blow after attempts by State-owned Anglo Irish Bank to call in a loan made to a major US consortium was thrown out by a Boston court.
It means Anglo's efforts to bring back cash to Ireland by suddenly foreclosing on billions of dollars worth of performing loans in America will now face tough legal hurdles. Anglo has about $12.5bn (€9.13bn) on its US loanbook.
Documents lodged during the case and seen by the Sunday Independent paint a withering portrait of the bank, and of its business practices.
Anglo's actions were described as "delinquent" in court and their move to call in the balance of a $180m (€132m) loan given in 2006 was summed up as a "complex scheme to coerce cash out of successful US properties".
The plaintiffs, in an affidavit, summed up Anglo as a "failed bank" which has been "taken over by the Government of Ireland and [which has] initiated a bad faith foreclosure based on a fabricated allegation of default.
The case involved a prestige nine acre development in Cambridge, Massachusetts, beside MIT and not far from Harvard University called One Kendall Square.
Anglo provided $180m in loans for the development of which $171m is still outstanding. The complex is now worth more than $200m, according to owners RB Kendall Fee who have never missed a repayment. Anglo attempted to foreclose on the loan, alleging that the property was, based on their appraisal, now worth far less than the original loan and the owners owe them millions of dollars to make up the difference.
Anglo decided to mount foreclosure proceedings and sell the property by auction on December 16. The owners moved to block the sale and took out legal proceedings which were successful.
Judge Judith Fabricant of the Suffock Superior Court granted the owners an injunction that blocks the foreclosure and extends the $180m loan until April 16, 2011, when the loan was due for refinancing under the original agreement.
In a statement to the Sunday Independent, the owners said: "We appreciate that the court has agreed with us and issued the injunction. This loan has always been performing and there have never been any legitimate issues with it.''
The move against One Kendall Square has provoked alarm among Anglo's customer base in the US and intense negative comment including a devastating critique in the Boston Globe newspaper of the bank's conduct.