Archive for December 28th, 2010

One of the most puzzlings acts of omission by NAMA in 2010 must be the agency’s decision to refrain from absorbing Paddy McKillen’s loans following NAMA’s success in Dublin’s High Court at the start of November. Instead NAMA has said that it will refrain from acquiring Paddy’s estimated €2.1bn loans from NAMA Participating Institutions pending the outcome of Paddy’s appeal (decision expected in January but will Paddy seek an appeal in Europe if he is unsuccessful at the Supreme Court?).

Meanwhile life goes on in Paddy’s businesses and in the past month, the City of Westminster Council has renewed planning permission to extend Paddy’s 5-star Claridge’s hotel in London’s West End (though Paddy would probably correctly claim it was Mayfair). The development work is expected to start after the 2012 Olympics and the plan is to build an extra 40 bedrooms onto the existing 203-bedroom hotel.

The planning permission carries some conditions including the commitment by Paddy’s company in the first instance to contribute GBP £4,786,530 to social housing in Westminster, GBP £33,800 for local council CCTV (the British have some fetish about being the most filmed people on Earth), GBP £162,240 for the so-called Crossrail project which will see rail facilities crossing from east to west London, GBP £226,460 for local environmental projects and not less than GBP £200,000 for public art. Bank of Ireland is also a party to the planning permission agreement and should BoI take possession of the property then BoI will assume responsibility for Paddy’s contributions. And since BoI’s loan is NAMA-bound and Dublin’s High Court has confirmed that NAMA can take over the loan, then it is NAMA that ultimately assumes responsibility here. So that’s how NAMA has made a commitment to potentially spend substantial sums on improving London’s environment.

But wait a second, doesn’t NAMA control the actions of the Participating Institutions with respect to NAMA eligible loans even before they are transferred to NAMA? Indeed it does via section 66 of the NAMA Act and the implication is that NAMA will need to have been consulted and to have approved entering into the agreement which might see BoI or NAMA ultimately having to make the contributions referred to above. There is no suggestion that Paddy’s company is unable to meet its loan obligations to BoI though the recent court case has revealed that although Paddy is able to meet interest repayments, there would be challenges in repaying the principal.

What may further confuse you is that the State owns 36.5% of BoI’s ordinary share capital, that BoI would in all likelihood not be able to survive without the State-guarantee and that BoI needs €2.2bn of new capital by the end of February 2011. So why is BoI facilitating a borrower by underwriting additional financial commitments when that borrower is fighting the State tooth-and-nail to keep his lending outside NAMA? It is not clear from the signature on page 43 of the Planning Department’s documents who at BoI signed the agreement but had they NAMA’s approval to enter into the commitment?

Does the Minister need to write another letter, this time to BoI, to remind that bank of the support it is receiving from the State? Why is NAMA underwriting additional financial commitments to Paddy at the same time as defending itself against an action which might jeopardise the agency?


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