Thursday 22 March 2018

Cosgrave hit by UK court's ruling on £14m loan

Michael Cosgrave (left), Patron of the DIT Doctorate
Michael Cosgrave (left), Patron of the DIT Doctorate
John Mulligan

John Mulligan

Developer Michael Cosgrave, his wife Nadine, and other Irish investors have been dealt a blow by a Jersey court.

The court agreed to a request for an application to be made to the English courts for administrators to be appointed over companies in which Mr Cosgrave and the others are involved. The companies are behind a major London Docklands site. The application is being made on foot of £31m (€42m) owed under a mezzanine loan.

Mr Cosgrave is a director of the Dublin-based Cosgrave Developments group. It was one of the biggest boom-time construction firms. The company is not involved in the Jersey case, however.

A £14.5m mezzanine loan was granted in 2014 to a Jersey company called Glengall Bridge Holdings, and with a startling interest rate, the outstanding amount has ballooned to £31.3m (€42m).

The finance was provided by Luxembourg-based company Siena, which is owned by Meadow Real Estate Fund II, an entity that's managed by New York-based Meadow Capital Management. Five other companies - all based in Jersey - acted as guarantors for the finance.

Mr Cosgrave and his wife are shareholders in the Jersey companies. So too is Mary Connolly, and a Helen Conlan. Mr Neville O'Boyle is a shareholder as trustee of the Mill Harbour Trust. Mr O'Boyle is a co-founder of Irish firm Key Waste.

At the time the mezzanine loan was advanced to Glengall, there was an existing loan outstanding in favour of Bank of Scotland, and the mezzanine loan was subordinated to this.

Less than five months after the mezzanine finance was granted, Glengall was in default on the loan. But Siena remained supportive of the Jersey companies until September last year, when it issued a formal demand for repayment. The mezzanine loan carries a fixed interest rate of 24.63pc, compounded quarterly, rising to 29.63pc following a default.

Enforcement was permissible by November 14. The senior loan owed by Glengall to Bank of Scotland was also purchased by an entity related to Meadow. The Jersey companies, including Glengall, are also in default of that loan, which amounts to £16.6m (€22.3m).

Last November, Irish accountant Patrick Conlan, who is a director of London firm Glenart, of which Mr Cosgrave is also a director, complained in a letter of what he said was the failure of both secured lenders to engage with a view to a consensual outcome, and gave notice that the respondents could commence insolvency proceedings in Jersey.

Mr Conlan also expressed concern that the appointment of administrators by the English court would crystalise significant tax liabilities "prejudicial to the existing unsecured creditors and shareholders".

The site and properties at Glengall Bridge Estate was valued in November at £54.5m. Heads of terms had already been agreed by late last year to sell part of the site in London to Perveril Securities, for £30m. An indication of a £16m offer for the remainder of the site has also been received from another firm. But the combined £46m would be insufficient to pay the secured creditors.

The respondents sought to have the appointment of administrators adjourned in an effort to reach a consensual outcome. Siena said no such outcome would be possible. The Jersey court acceded to the request from Siena to have administrators appointed.

"We do not regard it as a proper use of the court's powers to grant a two-and-a-half month adjournment in order, effectively, to put pressure on a creditor to enter into a consensual arrangement with its debtor," said the court.

Irish Independent

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