THE Attorney General has told the High Court that property investor Paddy McKillen is not entitled to any "special" treatment to prevent his €2.1bn loans being transferred to the National Asset Management Agency (NAMA).
The NAMA Act 2009 was brought in as part of the State's "unprecedented intervention" via the bank guarantee of October 2008 to support the financial system and economy but Mr McKillen's legal challenge failed to recognise this context, AG Paul Gallagher said.
The State was seeking to deal with the problem at "a macro level" but Mr McKillen and his experts did not recognise the banks could not have financed his loans without the state support provided to them since 2008, he argued.
The "writing was on the wall" when the draft NAMA bill of summer 2009 indicated what loans would be acquired but Mr McKillen had not moved to refinance then, he added.
The banks were the conduit through which the Irish economy was preserved and NAMA was established to remove "troublesome" assets from the banks' balance sheets. Speed was of the essence and NAMA aimed to achieve all transfers by February 2011.
Mr Gallagher was opening the State's arguments opposing Mr McKillen's challenge to the procedures under which NAMA decided to acquire his loans.
The case relates to Mr McKillen's loans with Bank of Ireland -- which he says are €211m and NAMA contends are €297m.
NAMA decided to acquire the loans on the grounds that the €2.1bn size of Mr McKillen's exposure to the five participating institutions in NAMA represented a "systemic risk" to the Irish banking system.
Mr McKillen is challenging the transfer on various grounds, including that the procedure by which NAMA decided to acquire the loans breached his constitutional right to fair procedures as he could not make representations against transfer.
Yesterday, Mr Gallagher argued Mr McKillen had established no substantial grounds to permit judicial review of NAMA's decision. Mr McKillen now accepted the loans were eligible for transfer under the NAMA Act but argued they should not be acquired.
Mr McKillen had a method of financing that suited him, taking out short-term loans to finance long-term investments and having those loans then rolled over, but it was "unsustainable" to suggest the State could not intervene on a macro basis because of his personal financing structure, Mr Gallagher argued. There was a risk involved in that method.
Mr McKillen's loan portfolio includes some non-performing loans, some loans secured on properties of "declining or uncertain values" and other loans which had expired, he said. The expired loans include an Anglo Irish Bank share loan of €41m but Mr McKillen has argued this is a "non-recourse" loan so there was no default involved.
While Mr McKillen was putting his need to preserve his relationship with his banks at the centre of his case, that relationship was only made possible by state intervention, Mr Gallagher said.
Mr McKillen "totally ignored" the nationalisation of Anglo and effective state ownership of Irish Nationwide Building Society. His case was premised on the need to maintain long-standing banking relationships with "all sorts of understandings", Mr Gallagher noted.
Mr McKillen had put his relationship with Anglo to the fore in his affidavits, but there were a range of breaches of loan to value and other covenants in some loans that he did not dispute, while some other loans had expired, he said. The NAMA Act provided any covenant breaches rendered loans non-performing.
Mr McKillen could have avoided transfer of his loans had he refinanced since 2008 but he had not done so and no explanation as offered, he said.
The case continues today before a three-judge divisional court.