Lone Star claims Gaelectric shares worth less than €5m
US private equity group Lone Star's legal proceedings against Eamonn McGrath, the founder and former chief executive of wind energy group Gaelectric, was admitted, on consent of the sides, to the Commercial Court yesterday.
As part of the case Lone Star says it obtained information at a shareholders' meeting last October that the entire share capital of Gaelectric Holdings plc was between nil and €5m.
The summary judgment application by Lone Star's LSF VIII Pine Investments (Gaelectric) Designated Activity Company against Eamonn McGrath, Portview Apartments, Thorncastle Street, Ringsend, Dublin, was admitted, on consent of the sides yesterday. Mr Justice Brian McGovern has fixed it for hearing on March 14.
The case arises from a settlement deed under which, the fund claims, about €10.6m became due and owing by Mr McGrath in November 2017.
After a demand for repayment was not met, it issued the legal proceedings.
Lone Star has previously taken a stake in Gaelectric, which is in the process of being sold.
Lone Star claims Mr McGrath agreed to enter into the settlement deed in return for the fund releasing him of obligations under a 2005 guarantee and indemnity provided by him to the former Anglo Irish Bank.
After Anglo was nationalised, the guarantee was taken over by Irish Bank Resolution Corporation (IBRC) and later sold on to the fund.
Mr McGrath, the fund claims, provided obligations to IBRC concerning the debt of a company, Finance Life.
The entire Finance Life debt was some €27m and, under the settlement deed, Mr McGrath agreed to pay €11m by the end of March 2017, it is claimed. The settlement also provided he was to transfer more than eight million shares owned by him in Gaelectric Holdings plc, to the fund, it is claimed.
The shares were security for Mr McGrath's obligation, under the settlement deed, to pay €11m on or before March 31, 2017, if that sum was not paid by then, it claims.
The settlement also provided the shares could be sold by the fund if no initial public offering (IPO) of Gaelectric Holdings plc had taken place and they had a value of less than €5m.
If Mr McGrath sold the shares, he was liable to pay any shortfall between the sum obtained for those and the sum of €11m, it is claimed. The fund says an IPO never occurred and Lone Star obtained information at a shareholders' meeting last October that the entire share capital of Gaelectric Holdings plc was between nil and €5m.
Mr McGrath's shares represented 8.37pc of the entire Gaelectric shareholding and the maximum value of his shares was €418,500, well below the €5m value, the fund claims.
That meant the conditions for it to sell the shares were met and it sold them for €418,500, leaving Mr McGrath with an outstanding liability of €10.6m which remains due and owing, it contends.