Day One at the High Court: Paddy McKillen v NAMA

Reminds me of reporting from Wimbledon, and indeed it looks like the hearing might go the full two weeks. It’s Paddy’s application and so opening for him yesterday was senior counsel Michael Cush who outlined what Paddy was (and just as importantly wasn’t) setting out to achieve.  Paddy is arguing

(1) That the procedures adopted by NAMA in its interpretation of the NAMA Act (particularly in relation to eligible assets) were a denial of a Constitutional right to fair procedures

(2) NAMA failed to exercise relevant considerations when judging the inclusion of Paddy’s loans in NAMA

(3) The decision to acquire Paddy’s loans was taken on December 11^th/14^th before NAMA was established (21^st December 2009)

(4) Under a correct interpretation of the EC approval to the NAMA scheme, at least some of a borrower’s loans must be impaired

(5) The NAMA legislation relating to the definition of eligible loans is so broad as to be unconstitutional

Reasons 1-2 are textbook reasons for launching judicial reviews in Ireland. Reason 3 is new to me in the context of this case. Reason 4 is the cause of the hullabaloo a couple of weeks ago when Paddy sought to include some recent correspondence and to expand his application.

Paddy wasn’t questioning

(1)  If NAMA was a good or bad idea or a good or efficient model to deal with the State’s difficulties

(2) The merits of NAMA acquiring Paddy’s loans

(3) The merits of NAMA acquiring unimpaired loans generally

(4) NAMA’s valuation procedures

(5) Whether Paddy’s €2bn-odd of loans were a systemic risk to the banking system

Other detail to emerge was that Paddy had 62 properties (shopping centres, hotels and offices) valued at €1.7bn-€2.28bn (Simon Carswell says €2.8bn) and there are loans totalling about €2.1bn secured against those properties with banks participating in NAMA, all of the loan repayments are being met and that the €150m income being generated on the properties amount to 1.7 times the required interest to be paid. They are 96 per cent let on 25-year leases to blue-chip tenants. It was conceded that the interest cover might have fallen below the permitted ratios on some loans as agreed with the banks but overall it was well above the typical level of 1.2 times interest cover. 26% of the property portfolio is in Ireland, with most of the remainder in the UK (with “many” in Northern Ireland), France and the US. Just 2.5% of his portfolio was land and development. Yesterday it emerged that the offending loan was for a reported GBP £35m on a property adjacent to Paddy’s Berkeley Hotel in London’s Knightsbridge. Of course it would depend on the LTV of the loan and what the property is now worth but 2.5% would seem to relate more to €1.7bn of property (a barrister being tendentious, no!)

There is a dedicated TAB for the Paddy McKillen case where you will find the background to the case and all the latest news. Henceforth these daily updates on the hearing will be posted there only.