A shotgun marriage – Paddy McKillen and the Barclay brothers?

“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, 13^th 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 14^th 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.