Archive for January 24th, 2011

“The game has changed now, however, and we are interested in getting greater realisation. So if there is a third party who wants to invest money with a borrower in a certain asset, even if the borrower might not be overly enthusiastic about it, part of our engagement with the borrower would be to make them enthusiastic about taking third party investment.”

NAMA CEO at the Oireachtas Committee on Finance and the Public Service, 13th April, 2010

It was the Financial Times on Friday last that broke the story that the Barclay brothers, (Sir) David and (Sir) Frederick, had bought into the Maybourne group – the company most associated with Paddy McKillen and which controls the 5-star hotel troika of Claridge’s, the Connaught and the Berkeley in central London. The Barclays had bought Misland (Cyprus) Investments, which owns 24.8 per cent of Coroin Limited, Maybourne’s parent. Misland was Peter Green’s investment vehicle for the luxury hotels group and the transaction now effectively removes Peter Green from the Maybourne group which still numbers Paddy McKillen, Derek Quinlan and Kyran McLoughlin amongst its investors, though it is Paddy that is most prominent.

It has been reported on 14th January, 2011 in Britain’s Property Week that NAMA had recently green-lighted an extension to the due date of some GBP £660m (€784m) of lending to the Maybourne group. Last week on here there was an examination of the issue of Ireland borrowing at 5.8% and lending below that rate to developers.

We are still awaiting the result of Paddy McKillen’s appeal to Ireland’s Supreme Court, the hearing for which concluded just before Christmas. The hearing was ultimately to determine if Paddy could avoid NAMA absorbing his loans and it still appears to be the case that NAMA has refrained from absorbing those loans pending the outcome of the appeal. Under the NAMA Act, NAMA can still control the loans through directing NAMA Participating Institutions.

The 75-year old Barclay twin brothers will probably be unfamiliar to most of us, ultimate proprietors of Britain’s right-wing Daily Telegraph and with a broad range of diverse assets, they’re net worth together is estimated at over €2bn which dwarves Paddy McKillen’s reported net worth of €75m. However there are two similarities between the brothers Barclay and Paddy – they’re each notoriously protective of their privacy and they own major hotel assets, including the Ritz in London and a share of the InterContinental hotel group. Might NAMA consider a greater tie-up with the Barclay brothers on what is likely to be one of its key loans?

UPDATE: 25th January, 2011. News broke late yesterday that the Barclay twins had purchased Derek Quinlan’s 35% stake in the Maybourne group, thereby giving the Barclays a 60% controlling interest in the group. No figures have been disclosed for the consideration for either the Peter Green or Derek Quinlan stakes. It is interesting that two weeks after NAMA apparently green-lighted a 2-year extension to loans at presumably a rate close to 3% when the State needs borrow at 5.8% to inject into the banks, that two British billionaire brothers have bought most of the company. Has NAMA shot itself and the Irish taxpayer in the foot?

UPDATE: 28th January, 2011. Simon Carswell in the Irish Times reports that Paddy is not for selling his 37% stake in Maybourne following the acquisition by the Barclay brothers of Peter Green’s 24.8% and Derek Quinlan’s 35% (now apparently subject to NAMA approval). The Irish Times goes on to claim that Kyran McLaughlin holds 3% of the group and that Paddy is consulting with his advisers.  So NAMA approved a 2-year extension to €784m of funding for the Maybourne group and it is for NAMA to approve the disposal of Derek Quinlan’s 35% share? Interesting…

UPDATE: 31st January, 2011. Britain’s Daily Mail reports that the Chinese and Middle Easterns are circling the Maybourne group, though there are distinct shades of the “inundated” by expressions of interest claims last Summer as Paddy initiated his case against NAMA.  There are conflicting stories on the status of Maybourne’s €784m debt mountain with Property Week claiming that NAMA green-lighted a 2-year extension and the Guardian claiming that the debt is due for repayment at the end of January, 2011 (today!). Expect some developments in coming days …

UPDATE: 7th February, 2011. The Financial Times (free registration required) reports that the Barclays have bought a stake in the group’s debt to Bank of Scotland which is reported to be convertible to equity.

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Financial Regulator’s Prudential Capital Assessment Review (PCAR) announcement 28th November, 2010

Having closely followed the progress of the Credit Institutions (Stabilisation) Bill through the Dail before Christmas, I am a little confused by the claims from the Taoiseach that the Finance Bill that was published on Friday last can’t be voted into law by the end of this week. And I wonder if the government might be stalling so as to remain in power for the crucial period covering 28th February, 2011 when the fate of AIB and more importantly Bank of Ireland, will be decided.

Whilst it has been the case in previous years that the Finance Bill has usually taken two months to debate and enact, let’s look again at the timetable of, and Oireachtas time given to, the enactment of the  Credit Institutions (Stabilisation) Bill

10/12/2010 – ECB receives draft of the Bill
14/12/2010 – Minister for Finance publishes Bill. This was his statement, these are the explanatory notes issued for the Bill.
15/12/2010 – First Stage
15/12/2010 – Second Stage
15/12/2010 – Committee Stage
15/12/2010 – Committee Stage (Resumed) and Report and Final Stages
15/12/2010 – Seanad Éireann – Second Stage
16/12/2010 – Committee Stage, Report and Final Stages
16/12/2010 – Motion for Earlier Signature
17/12/2010 – ECB issues criticism of Bill which is effectively dismissed
21/12/2010 – the President consulted the Council of State
21/12/2010 – following the meeting the Act was signed by the President.

My recollection is that the passage of this Bill through the Oireachtas took seven hours. Several sections were not even debated. Were it not for the intervention of the President in calling a Council of State the Bill would have passed through all stages in the Oireachtas and would have been signed into law on 16th December, 2010, having first been published on 14th December, 2010.

23/12/2010 – Hearing in-camera at the High Court where lawyers for the government sought to inject €3.7bn into AIB and there is the likelihood that other applications were examined because the government successfully sought to exclude journalists and interested parties because of issues of “extreme commercial sensitivity”.

So in a nutshell we had the Credit Institutions (Stabilisation) Bill being rushed through the Oireachtas in a matter of hours and remember the Bill allows the Minister for Finance to spend billions of euro on our behalf from our reserves in the NTMA and NPRF without presenting his decisions to the Oireachtas for oversight, it allows the Minister to interfere on an extraordinary level in the operation of any company operating in Ireland including appointing special directors. It is arguably the most draconian and undemocratic legislation since the Emergency Act in 1939.

On the other hand we have a Budget 2011 which was largely put into effect on the night of the Budget – 7th December, 2010. The taxation and government spending provisions have largely been put in place. The provisions to be debated might contribute €100m here or there. Compared with the €1.5bn that now seems almost certain will be taken from the NPRF at the end of this month and shovelled into BoI under the provisions of the Credit Institutions (Stabilisation) Bill, it’s chickenfeed,

From the Constitution:
16.3.2 A general election for members of Dáil Éireann shall take place not later than thirty days after a dissolution of Dáil Éireann.

So the question asked on here is this : is this Government procrastinating over the enactment of the Finance Bill so as to retain power long enough to direct new injections into the banks at the end of February? Unless the Opposition secure a dissolution of the Dail by this Friday 28th, January, 2011 it will be the incumbent administration that makes the billion euro injection decisions at the end of February.

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