“BB [Barclay Brothers] have now been told that the bank has chosen a path to work consensually with you rather than to deal with them, I understand they are not happy.” and “Please keep that confidential I cant have board positions like this leaking out” Two text messages reportedly sent by the chief executive of IBRC, Mike Aynsley to developer Paddy McKillen in January 2012
In London, the battle for control over the three Maybourne hotels in central London, continues to rage. Paddy McKillen gets his opportunity to present his appeal case in February 2013, this is the appeal against the August 2012 judgment in London’s High Court which dismissed Paddy’s application to have the Barclay brothers’ acquisition of control of loans owed by Derek Quinlan in the hotel group declared unlawful.
The legal ins-and-out get very complicated but at its root, the billionaire 77-year old Barclay twins are trying their damnedest to take control of the company which owns the three hotels, Claridge’s, the Connaught and the Berkeley. This is brutally simple – one set of rich folks is tenaciously pursuing the acquisition of prized assets.
Paddy, on the other hand, has had a significant 35%-odd share in the group for nearly a decade, has overseen some redevelopment of the hotels and wants to hold onto his stake or get what he thinks is an adequate price for his stake. Again, this is brutally simple – Paddy, also a wealthy man, wants to protect his wealth.
What complicates the whole business is that the hotel group was acquired with a whole series of bank loans and that there were a number of shareholders. The Barclays – no relation to Barclays Bank, they’re businessmen who own the Telegraph newspaper and Ritz Hotel in London – have been buying up stakes from shareholders, which is also simple.
But they have also been buying loans which are either secured on stakes in the business or on the business generally. They bought €800m of loans from NAMA in September 2011. They also acquired control over loans advanced to Derek Quinlan which were secured on Derek Quinlan’s shares in the hotel group though there is dispute over whether control over Derek’s loans is tantamount to control over the shares. It gets complicated!
But a new front has opened up. The Barclays are trying to buy the loans that IBRC gave to Paddy McKillen, loans which are secured on Paddy’s stake in the hotel group. But IBRC has been rebuking the Barclays’ approaches which were apparently first made in December 2011. And we learn in today’s Irish Times that Paddy has some €300m of “personal debt” loans from IBRC and the Barclays are still trying to buy it. It is unclear what % of shares in the hotel group owned by Paddy are subject to the €300m loans, it is intimated that the €300m of loans are secured on 13.3% of the shares, which would be a little over a third of Paddy’s present stake in the group.
It is also unclear what the Barclays are offering for the loans which have a face value of €300m but it is intimated that they are offering €150m or 50c in the euro, but there are strings and incentives which blur that number.
What is interesting is the statement in today’s Irish Times report “The €150 million for the Coroin security equals the amount accepted by the National Asset Management Agency when it sold a 13.3 per cent security on Coroin shares held by financier Derek Quinlan to Malaysian investors, JQ2, the Barclays have argued”
The implication is that the Barclays are offering the same price to IBRC for a stake in the hotel group as NAMA was offered and which NAMA accepted. So why would IBRC hold out for more?
The apparent answer is that in addition to the €300m of personal loans given by IBRC to Paddy McKillen, there is an additional €1.3bn of loans given to Paddy’s companies by IBRC and the concern seems to be that the prospects for getting the €1.3bn back from Paddy’s companies will be diminished if these personal loans are sold.
Which is curious, because we remember that in the case that Paddy took against NAMA in Dublin’s High Court back in 2010, we had the CEO of IBRC or Anglo as it was then known, Mike Aynsley producing a statement for Paddy which said that all his loans were performing and that Anglo objected to Paddy’s loans being transferred to NAMA.
But now, apparently, we have a position where IBRC is demanding more for Paddy’s personal loans than NAMA deemed reasonable in the case of Derek Quinlan’s loans. And we seemingly have IBRC changing its position on Paddy’s loans compared with its position at the High Court in 2010 – it would surely have cast the High Court case in a different light if Anglo were to have suggested that certain loans mightn’t be recovered if the Maybourne loans were sold. We also have the perception of an inappropriate chumminess between IBRC’s Mike Aynsley and Paddy McKillen which was alluded to in the context of the text messages shown at the top of this blogpost, which were aired in open court in London earlier this year, though Mike Aynsley recently defended those texts at an Oireachtas committee hearing by saying
“There was nothing untoward in any way about the approach to Mr. Paddy McKillen to advise him of the board’s decision. We were going through a process, of which Mr. McKillen and the Barclay brothers’ representatives were aware, which culminated in a submission to the board and its approval of the maintenance of a process of consensual restructuring of Mr. McKillen’s loans rather than the sale of a portion of these to the Barclay brothers. When we came out of those meetings, my colleague Mr. Richard Woodhouse was given the authority to contact the Barclay brothers to inform them of the decision. I attempted to call Mr. McKillen but, of course, could not get hold of him. He does not do e-mail so I sent him a text. It was as simple as that. The reminder to him, following it up, was simply that this was a board decision and that it was a bank-client relationship that should not be divulged, as we were aware at the time that he was in litigation with the Barclay brothers. It was inappropriate, we felt, that he went to the press with that. Of course, it ultimately came out during the discovery process in that litigation. That is all there was to it.”
Today’s report which suggests IBRC is holding out for more than NAMA accepted for shares in the group may reignite the controversy and suspicion of IBRC’s relationship with Paddy. And because IBRC is 100% owned by us, we all have an interest in what is going on. It should be said that we seem to just get the Barclays’ side of the story in today’s Irish Times, but the question stands -
“Why is IBRC demanding a premium to sell Paddy McKillen loans to the Barclay brothers?”