Monday 19 March 2018

Nama silent as Blackstone settle price-fixing case

Questions raised over US firm's Irish assets

MICHAEL O’FLYNN: Builder is now fighting for survival
MICHAEL O’FLYNN: Builder is now fighting for survival
Sarah McCabe

Sarah McCabe

BLACKSTONE, the private equity group battling Cork developer Michael O'Flynn, has paid millions of dollars to settle US claims that it colluded to keep prices low when buying assets. The settlement, revealed last week, raises questions about how Blackstone does business in Ireland.

The National Asset Management Agency (Nama) has sold Blackstone loans that were once worth more than €1.3bn. Any collusion here in Ireland would cost the taxpayer millions in lost income.

Both Blackstone and Nama refused to comment when asked by the Sunday Independent about the possibility of similar collusion here. Nama would only say the agency's "policy is that all properties/loan sales are openly marketed to a wide pool of buyers to ensure sales proceeds are maximised for the taxpayer."

Blackstone and two other American private equity giants were accused of unfairly pushing the sale price down on some assets they bought, by agreeing not to compete for deals and allocating transactions among themselves.

Blackstone had been scheduled to go to trial in relation to the lawsuit in November.

Alongside fellow buyout funds KKR and TPG, Blackstone have now agreed to pay a combined $325m (€242m) to settle the claims. Plaintiffs included pension funds and individual investors.

Blackstone made the settlement without admission of liability or any admission of wrongdoing.

Blackstone has been one of the biggest buyers of Irish assets and loans in the wake of the recession.

Its Irish assets include the Burlington Hotel and loans connected to a large portfolio of offices in Dublin 2.

It also bought a massive portfolio of loans connected to developer Michael O'Flynn for €1.2bn earlier this year.

Its purchase of Irish assets is expected to continue. It has raised at least €4bn to buy European commercial real estate - the largest fund of its type in the world - with much of that expected to go towards Irish property.

Blackstone is engaged in a vicious court battle with Mr O'Flynn which could determine the fate of his billion-euro property empire.

On the line are some of the choicest properties and development land in the country's second biggest city.

They include the 17-story Elysian Tower in Cork city, and 50 commercial and 16 residential developments in Cork, mostly in Ballincollig, Crosshaven and Mallow, and nine retail assets including the Ballincollig Shopping Centre. Mr O'Flynn's empire also encompasses Dublin, including property projects at the Long Mile Road and Killiney.

The O'Flynn group was one of the biggest Irish construction companies in Ireland during the boom. The group also built properties in Germany and the UK.

Loans of €1.8bn attached to these and other assets passed into Nama in 2009. Nama sold them earlier this year, for a 35pc discount, to New York-based Blackstone.

The US company is thought to have outbid Texas-based hedge fund Davidson Kempner and New York private equity firm Lone Star.

Its legal dispute with Mr O'Flynn was triggered earlier this summer, when Blackstone subsidiary Carbon Finance sought immediate payment of a €16m personal loan. This resulted in a default on much bigger company loans.

Carbon also successfully applied for the appointment of an examiner to four of his companies and removed Michael and John O'Flynn as directors.

O'Flynn challenged both moves in the High Court, and has argued that his companies were not and have never been insolvent. The case, heard by Judge Mary Irvine, will be decided on Wednesday. However, it looks set to run and run.

It is understood that Mr O'Flynn will appeal any decision against him to the Supreme Court.

Sunday Indo Business

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