Friday 23 March 2018

Pub owners refused injunctions preventing loans' sale

The Treasury Building on Grand Canal Street Lower where NAMA is based. Picture: Tom Burke
The Treasury Building on Grand Canal Street Lower where NAMA is based. Picture: Tom Burke

A businessman and two companies who own or control several well-known bars in Cork have been refused injunctions preventing the sale of their performing loans to NAMA or other entities.

The orders were sought pending a full hearing of the companies' claim for damages over alleged overcharging on loans and misselling of derivative agreements to them by the former Anglo Irish Bank, now Irish Bank Resolution Corporation (IBRC).

Dagenham Yank Ltd and No One In Particular Ltd, of which Brendan McCabe is a director, operate Bodega at Peters Market, Cornmarket Street; Sin É, Coburg Street; The Oval, South Main Street; Crane Lane, Phoenix Street, The Mutton Lane at Mutton Lane, and Arthur Maynes, Pembroke Street. The bars have a turnover of about €12m annually and employ 255 people.

Prior to the hearing of the main action seeking to prevent the special liquidators of IBRC selling the loans to NAMA, Mr Justice Paul Gilligan was asked for orders restraining the loans sale.

The companies' indebtedness is some €18.2m and they had obtained a €8.1m valuation for the loans and offered to buy them for €8.75m, the court heard.  However the IBRC liquidators refused that offer, saying it represented a discount of some 40pc on par value.

In the main action, the companies want damages over alleged significant overcharging by Anglo on loans and misselling of derivative agreements dating from 2006 under which the estimated indebtedness of the companies was some €18.2m. Mr McCabe also provided personal guarantees relating to financial arrangement between the companies and IBRC.

The plaintiffs' loans are all performing short term loans which over the years were consistently "rolled over" by Anglo.

The special liquidators are currently considering bids for the loans which were bundled into the "Stone" portfolio of some €1.3bn loans offered for sale by IBRC, as part of the bank's winding up, to selected bidders who must show they can provide committed funding of €1.3bn.

If the bid for the Stone portfolio does not meet the valuation of the liquidators, the loans will be taken over by NAMA which will then decide whether loans should be sold individually or collectively.

Part of the companies' complaint was that, under the NAMA Act, the agency can ignore any equitable set-off which may arise in favour of any borrower but, at the outset of the case, it was stated NAMA was not relying on that provision.

It was also conceded on behalf of the liquidators some borrowers would have their loans individually dealt with by the liquidators.

While refusing the injunctions, Mr Justice Gilligan said the companies had raised a serious issue to be tried concerning their right to be heard regarding the proposed loans sale and to be given reasons for any decision by a public law entity which may have adverse consequence for them.

Given his view that damages would be an adequate remedy if the companies won their main action, they were not entitled to orders preventing the loans sale, the judge ruled.

 If they won, the factual reality was any damages obtained would be unlikely to exceed their level of debts to IBRC, he observed.

The balance of convenience was also against granting the injunctions due to the plaintiffs' delay bringing their case and the fact their loans continue to be considered as performing loans which they may buy out by paying off the remaining indebtedness should they wish.

The court must also have regard to the public interest when injunctions are sought against the special liquidators, he said.

In that context, he had regard to the purposes of the IBRC Act regarding the orderly winding up of IBRC and need to "preserve and restore" confidence among the wider public in the banking sector.

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