Saturday 24 February 2018

McKillen wins court battle against Barclay brothers over loans

Develop Paddy McKillen.
Develop Paddy McKillen.
David Barclay (left) and his twin brother Frederick after receiving their knighthoods. Photo: PA

Dearbhail McDonald Legal Editor

PROPERTY investor Paddy McKillen has won a court battle against the billionaire Barclay brothers in their bid to buy up some €246m of his loans.

The brothers, who defeated the Belfast-born businessman in London last month for control of three luxury hotels there, must wait until next year to find out if they are the winning bidders.

Yesterday, the High Court set a trial date of March 4 next for a legal challenge by Mr McKillen to prevent the former Anglo Irish Bank selling the €246m tranche of McKillen loans to the Barclays.

The case came before the High Court on the deadline day for any initial bids for the McKillen tranche to be lodged with the special liquidators of Irish Bank Resolution Corporation (formerly Anglo).

A final decision on the winning bid is expected to be made next March. If Mr McKillen wins his case, the liquidators have said they will abide by the court's decision.

DELAY

The case will be rendered moot if the Barclays do not emerge as the winning bidders.

But if the twin brothers are selected as the bidder, the sale could be delayed for months as Mr McKillen's challenge -- and any subsequent appeal -- will be heard before any sale proceeds.

The delay could help boost McKillen's chances of refinancing his loans. Subject to the Barclays winning the bid, the case will open on March 4 and is listed for six days.

Yesterday, Cian Ferriter for the liquidators, told Mr Justice Paul Gilligan the stage-two bidding process for the loans will begin next month -- and his clients are anxious the litigation should not impact on the loans' sale process.

The liquidators were effectively caught in "the crossfire" in the battle between Mr McKillen and the Barclays, and appeared to have been joined to the case purely to ensure any orders granted to Mr McKillen could be put into effect, Mr Gilligan said.

Michael Cush, for Mr McKillen, agreed his client's dispute was with the Barclays -- and said the sides had agreed the injunctions application did not need to proceed now, as the sides had agreed on an early "telescoped hearing" (a hearing where the issues would be narrowed down) next March.

Mr Cush also said, because there would be an early full hearing, he was not now seeking to join the State to the case for the purposes of challenging provisions of the IBRC Act which, said Mr Cush, makes it very difficult to get injunctions against the bank.

The Irish proceedings come after Mr McKillen last month lost the final stage of his £20m (€24m) UK court battle against the Barclays for control of three luxury hotels -- Claridge's, the Connaught and the Berkeley.

Mr McKillen's concern is to ensure whoever buys the loans does so on the basis of renegotiated terms and conditions related to those loans.

He contends the personal loans tranche cannot be treated as anything other than loans of a fixed three-year period from December 2012.

In an affidavit, Mr McKillen said it was necessary to bring the action "to protect my commercial interests and my constitutional rights relating to property".

A good faith provision in the shareholders agreement of the London hotels' holding company -- Coroin Ltd -- meant the IBRC liquidators should not accept an offer from the Barclays, he said.

CRISIS

Mr McKillen said he had been a customer of IBRC for over twenty years and has numerous performing loans -- including for €241m relating to his interest in the Jervis St Car Park, Dublin; €308m relating to his interest in properties in Doncaster, UK; and €246m personal loans secured by a charge on certain assets including shares in Coroin Ltd.

After the banking crisis, he sought to protect the position of himself and his businesses by ensuring the Doncaster, Jervis Street and personal loans could not be called in, leaving him without credit facilities, he said.

He engaged with the bank about extending all of his loans, including the personal loans, by three years. The bank was very anxious to retain him as a customer and strongly resisted attempts by NAMA to acquire his loans, he said.

However, a complex "jumbo" refinancing proposal of 2012 had not been effected.

That involved his offering an hotel and farm in Argentina, plus a personal pledge not to reduce his worldwide non-IBRC charged assets below €50m, as additional security, he said.

Irish Independent

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