Just consider this imaginary venture for a moment. If I, together with John and Mary invest €10,000 in a business and our shareholder agreement says that none of the three of us can sell our 33.3% stakes without offering it to the others first; a little while later, if Mary sells her 33.3% stake to Theobold, my worst enemy, without offering it to John or myself first, you’d think I could go to court to have the sale set aside, allowing myself or John to at least bid for the stake and match whatever Theobold was offering. This all seems plain and simple.
Yet spare a thought for Paddy McKillen who together with former tax-man Derek Quinlan, Lochlann Quinn and the Green family from Manchester, bought the Maybourne hotels in 2004 with a shareholder agreement, which on the face of it, is similar to my imaginary arrangement with Mary and John, and yet over the course of the past two years, Paddy’s business rivals, the billionaire Barclay brothers have not only acquired the Green family share but now control loans secured by Derek Quinlan’s shares.
Not only that, but when challenged as to whether Derek will use his shares to do their bidding because, after all, he has received millions from them in financial support, the Barclays say “no, no, we’re just helping out a friend”. And so good is that friendship that the Barclays can’t even correctly spell D-E-R-E-K and referred to him as “Derrick” in mobile phone texts!
And separately, Paddy borrows money to buy the hotels from a lender which agrees in writing it will not sell the loans unless it consults with him beforehand, and even then will only sell the loans to a financial institution. And what does NAMA do, but sells the loans to a company set up by the Barclay brothers – no relation to Barclays bank, it should be noted – whose sole aim is to acquire the loans, and Paddy gets less than 60 minutes “consultation” about the sale.
And then finally, just to rub it in, throw in a British High Court judge who dismisses Paddy’s case in a lengthy judgment that refers to the knighted Barclay brothers in matey terms like “Sir Frederick” and then hits you with legal bills said to be €25m.
You mightn’t blame Paddy for being a tad peeved at it all.
And last weekend’s news in the Sunday Times (not available without a subscription) that our US friends, Blackstone – the investors who are waiting for “blood on the streets” before investing in Europe – have now offered to refinance loans that are due at the Maybourne hotel group, really is the cherry on the cake for Paddy. As part of the refinancing, Aine Coffey at the Sunday Times reports that Blackstone is insisting the shareholders stump up GBP 145m (€180m) of additional equity, of which Paddy’s share will be GBP 52.5m (€65m) and if the new equity is not forthcoming from Paddy by mid-December 2012, then Paddy reportedly faces the prospect of the Maybourne group being placed in administration at the behest of the Barclays. It seems that one way or the other Paddy faces his shareholding being severely diluted or potentially seeing its value wiped out. Paddy McKillen’s spokeswoman is quoted by the Sunday Times as saying “the rights issue is a hostile takeover tactic by the Barclays..it is not required by the hotel group as there are many other better offers on the table”
Paddy has been given leave to appeal the judgment of the British High Court which dismissed his claims with respect to the control over Derek Quinlan’s shares. And a hearing is expected in the next three weeks. He is also said to be pursuing an appeal against the decision of the British courts to approve the sale by NAMA of the €800m loans to the Barclay brothers.
UPDATE (1): 1st December 2012. Mark Hennessy in the Irish Times today reports that Paddy has had what seems to be a terminal set-back in his bid to have the sale of the GBP 660m (€800m) of loans that were owed by Maybourne, the hotels group to the Barclay brothers’ company, Maybourne Finance, nullified. It is reported that the UK’s Supreme Court has rejected Paddy’s request to appeal the Court of Appeal’s decision last summer which declared NAMA’s sale of the loans to have been lawful. There was no comment from Paddy’s spokesperson at time of writing. Since 2005, when the newly formed Supreme Court replaced the House of Lords, the Supreme Court is the highest court in the UK, so this looks like the end of then road for Paddy on this strand of his challenges. He still has an appeal hearing pending on his challenge to the High Court judgment which dismissed his case that the Barclays’ had unfairly acquired control of the group.
UPDATE (2): 1st December 2012. The ruling by the UK Supreme Court is shown here
The decision yesterday relates to an application by the Barclays for the courts to rule on the NAMA matter before the hearing of the appeal of Judge Richards ruling in August 2012. Paddy defeated the application at the High Court, which judgment was then appealed by the Barclays to the Court of Appeal where the Barclays were victorious and Paddy sought permission to appeal to the Supreme Court which was denied yesterday. You would almost get a headache keeping track of the various matters at issue in this case, and their position in the court hierarchy!
What might be regarded as the main topic of appeal, the Barclays’ acquisition of control over Derek Quinlan’s shares, will be heard in February 2013 in front of the UK Court of Appeal, apparently at the request of the Barclays after the Court of Appeal had previously indicated it would hear the appeal before Christmas. The Irish Times today indicates that Blackstone’s refinancing has been paused until “the end of the year”.