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Treasury and Nama: the end of the affair

'THE site lay tantalisingly waiting for a saviour, legs akimbo, breasts appetisingly on openish display. We laid in patient wait, hoping for the right moment, which eventually arrived."

For anyone trying to understand how relations between Treasury Holdings and Nama finally broke down, Richard Barrett's semi-erotic description of how he and Johnny Ronan finally managed to buy London's Battersea Power Station in 2006 for €600m provides a useful starting point.

Barrett's candid contribution to That'll Never Work: Success Stories from Private Irish Business -- a book replete with hubris and devoid of irony, published on the brink of the global economic crash in 2008 -- gives a telling insight into how someone so outwardly urbane and reserved came to work so well alongside the so-called 'bearded buccaneer' Johnny Ronan.

It also shows how, no matter how bespoke his suit or careful his pronunciation, that Barrett has been possessed all along of the same animal spirit as Ronan when it comes to the art and execution of the deal.

But where such 'spirit' may have been useful while the economy was in the ascendant and credit was easily and cheaply available for the next big development opportunity, it was always going to set the Treasury Holdings chiefs on a collision course with the men from Nama in an age where austerity reigns.

Indeed, when the agency's chairman, Frank Daly, told an Oireachtas committee in 2010 how the "jets, the yachts and the Bentleys or whatever" would not be supported by Nama, it didn't take a genius to figure out who he had in mind, and that the days of fine wines and roses enjoyed by Ireland's highest-profile developers would need to come to an end. Informing Daly's call for developers to adjust to this new reality was the crucial fact that the €72bn debt they previously owed to the Irish banks was now owed directly to the Irish taxpayer by virtue of its transfer to the State's so-called 'bad bank'.

And where Barrett's remarks in 2008 that his bearded business partner had "acute taste buds when it comes to willingly mortgaging the company's asset base for a rare vintage at lunchtime" and how he had "a pay-by-instalment facility at Patrick Guilbaud's" may have once drawn laughter, four years into the financial crisis, they aren't quite as entertaining.

Not that Treasury Holdings didn't manage to maintain a civilised relationship with Nama up until now. No mean feat when one considers the brouhaha that followed Johnny Ronan's €60,000 jaunt by private jet to Morocco in the company of former Miss World Rosanna Davison and the infamous 'Rumble in Ranelagh' with Glenda Gilson that followed.

Indeed, notwithstanding the damage done to Johnny Ronan's pride and his nether regions from Ms Gilson's well-aimed foot, Treasury managed to sign a Memorandum of Understanding (MoU) with Nama in December 2010. While MoUs are non-binding agreements entered into by the agency and their debtors in advance of formal and binding arrangements, the fact that Treasury got that far was widely seen as an indication that Barrett and Ronan were among those developers now adapting to the State's oversight of their affairs. Richard Barrett's participation in the Global Irish Economic Forum at Dublin Castle last October was interpreted by many as further evidence within development circles as indicative of the health of Treasury's relations with Nama.

It took a decision by Lloyd's Bank and Nama last December to jointly appoint an administrator to the Battersea Power Station site in which Treasury's UK company, Real Estate Opportunities (REO), owns a 54 per cent stake to show that things weren't going quite as well as they appeared to be.

Relations soured considerably on January 9 last after Nama chiefs informed Treasury's owners that it would now be enforcing its securities on the €900m it paid for loans with a face value of €2bn it had taken over from them in November 2009 and would shortly move to appoint a receiver to the assets underpinning those borrowings. While Barrett and Ronan are understood to have been both shocked and surprised at Nama's move against them, they managed to secure a standstill agreement period, during which time they engaged in a frantic effort to find investors to buy the massive debt.

By the time that standstill came to an end at 4pm last Wednesday, Treasury is said to have lined up proposals from Australian investment bank Macquarie and the US real estate group Hines towards that end.

Details of the proposals from those parties have been well ventilated in the media, but have not been officially confirmed by any of the parties involved.

In the absence of such confirmation, speculation in relation to the size of the offers has been rife, with one source claiming that Nama received bids ranging from 20 to 40 per cent of the €900m the agency says it paid to the banks from whom Treasury Holdings had borrowed €2bn originally. A source amenable to Treasury's cause, meanwhile, claims that that the investors were willing to pay Nama more than €600m for the lesser sum of €1.1bn loans that it acquired for approximately €540m. Explaining the difference between Treasury's €1.1bn loan figure and the €2bn figure put out by Nama, the same source asserted that the agency was confusing loans taken by Treasury with loans taken by Johnny Ronan personally.

And while it would be correct to say that such a deal would have represented the largest commercial property transaction to have taken place in Ireland since the onset of the economic crisis, there is little doubt that Nama chiefs would have faced a massive public and political backlash were they to have proceeded. Compounding Nama's predicament and no doubt colouring its attitude to the deal was the condition that Treasury would have been involved in the investments going forward.

Officially, Nama simply said that it had examined both proposals and deemed them to be "not commercially acceptable" before pressing the proverbial nuclear button last Wednesday and ordering the appointment of Pricewaterhouse Coopers and Ernst & Young as joint receivers to upwards of 35 properties located variously in Dublin, Wicklow and Sligo.

Unsurprisingly, Treasury reacted swiftly to the decision, sending its lawyers down to the High Court to seek an injunction. Last Thursday afternoon, High Court President Mr Justice Nicholas Kearns set February 21 as the date to hear the case in which Treasury will argue that Nama has acted unreasonably and disproportionately and is in breach of its statutory duty.

While the case is pending, the receivers appointed by Nama last week will hold off on taking any further action in relation to the properties now under their control.

Sunday Independent