At 11am this morning in Court 14 at the Four Courts before Ms Justice Mary Finlay Geoghegan will commence battle between Treasury Holdings and NAMA, after NAMA last month sought to appoint receivers to a portfolio of properties controlled by Treasury; the proceedings are pencilled in to last four days. It’s another important legal test for NAMA as its relatively recent procedures come under the legal spotlight again. Whilst NAMA is remaining tight-lipped about the whole matter generally, it seems that Treasury is more forthcoming with the Financial Times yesterday reporting that the following matters are at issue
(1) A claim that NAMA will destroy the value of the property assets placed in receivership and could threaten Treasury’s wider businesses
(2) A claim that NAMA misled the company by continuing negotiations with Treasury on its overall business plan while privately making a decision in December to place its properties in receivership
(3) A claim NAMA rejected without sufficient consideration an offer by third party investors –Macquarie and Hines – to acquire its loans
The Irish Times reports that
(1) Treasury’s third party investors – the implication is that Treasury brought the investor interest to the table – were prepared to offer reasonable terms – elsewhere said to be €600m for loans which NAMA reportedly acquired for €541m but were worth between €1.1-1.5bn at par value. Apparently the third party offers required NAMA to provide staple financing.
(2) Treasury claims it co-operated with NAMA throughout and that the Agency’s action took it completely by surprise
And in respect of NAMA
(1) NAMA is likely to argue that Treasury is insolvent and beyond rescue and that it had lost patience with the developer
It is understood that Michael Cush SC will be batting for Treasury. It’s not clear yet who will be representing NAMA who in the past have had Paul Gallagher SC, the former Attorney General in their corner, though at the hearing in January 2012, it was Cian Ferriter SC who represented the Agency.
The hearing has been billed as an unprecedented look into NAMA’s procedures, including enforcement procedures, and culture, which given the secrecy of the Agency, will probably give us a few headlines in the days ahead. The position on here is that in principle, NAMA having acquired €1-2bn of loans – it’s unclear from reporting – seems entitled to foreclose on the loans if Treasury is in default. However NAMA has been shown previously to have some sloppy procedures and as with all legal cases, there is an element of a gamble. There is likely to be a strong press presence in Court 14 this morning and there will be an update here later today.
UPDATE (1): 21st February, 2012. RTE has filed the first report on the case for its One O’Clock news bulletin. The broadcaster says that Michael Cush SC has opened the case for Treasury and said Treasury is challenging two NAMA decisions (1) December 8, 2011 to call in Treasury’s loans and (2) January 25, 2012 to appoint receivers. Michael Cush is back on his “fair procedures” mantra which he used, ultimately to good effect at the Supreme Court appeal, in the Paddy McKillen case. It was conceded according to RTE by Treasury that it was insolvent, or more specifically “balance sheet insolvent” [what other kind of “insolvent”, is there?] It is claimed that although NAMA made a decision on 8th December 2011 to appoint receivers, that was not communicated to Treasury until 9th January 2012. Remember this is all from Treasury’s point of view, and NAMA may well refute some or all of this when it gets its turn.
UPDATE (2): 21st February, 2012. Mary Carolan has a solid report on the first days proceedings in the Irish Times. It seems that Treasury is suggesting that NAMA’s foreclosure action is putting 400 jobs at risk – a touchy subject given the unemployment crisis in the country – with the Ritz Carlton, the National Convention Centre, a development in Spencer Dock in north Dublin Docklands and Sligo Town Centre all at risk. We get some more financial information on the financials involved – the Treasury loans are said to be worth €1.5bn at par value and we get information on three offers, one fromUS group CIM for €805m, one from McQuarie for €622m and one from Hines for €600m. The CIM offer is said to have included NAMA’s interest in the Battersea Power Station and it is claimed by Treasury that this offer was agreed by the NAMA board in 2011, yet it did not proceed. Apparently by reversing out the Battersea interest, the CIM offer is comparable with the MacQuarie and Hines’ offers. At least that is what is claimed. Treasury is said to be concerned that NAMA will not maximise the value of the Treasury portfolio if it is sold piecemeal. Not exactly convincing stuff from Treasury, it must be said. The case is scheduled to last another three days and we have yet to hear NAMA’s side of the story. On a human level, nothing of any real gossip value on day one.
UPDATE (2): 22nd February, 2012. The Financial Times reports on Day 1 of proceedings, and adds to the store of knowledge with Treasury’s claims that NAMA’s actions might damage non-NAMA parts of the Treasury empire including Treasury China Trust (TCT), where it is claimed an Asian investor is “interested in acquiring a stake”. There’s a new angle to the CIM offer in 2011 which was reported elsewhere to have been agreed by the NAMA board, the FT saying “NAMA delayed sign off on the deal when it became concerned about an acquisition of shares in TCT by Treasury founders, Mr Ronan and Mr Barrett. Treasury claims NAMA had full knowledge of the transaction and alleges NAMA’s delay on the CIM deal caused it to fall apart when Irish property prices declined further”
UPDATE (2): 22nd February, 2012. RTE again has the first reporting of today’s proceedings. You might find more detail in terms of NAMA’s case in the coverage of the NAMA affidavits here this afternoon. RTE does report on the conclusion of Treasury’s opening statements and affidavits and says that Treasury’s Richard Barrett claims NAMA’s dealings with the investors was (according to RTE) “improper behaviour for a public body”. Treasury’s Richard also says he refused to help disgruntled NAMA developers, though sadly we don’t get more detail on this claim.
UPDATE (3): 22nd February, 2012. Mary Carolan of the Irish Times (who also was credited in the Irish Independent this morning!) has penned a detailed account of today’s proceedings. She adds perspective to the NAMA affidavits and the dispute over “good faith” on NAMA’s part.
UPDATE: 25th February, 2012. The Irish Times and Independent seem to have pooled resources for a strikingly similar review of Day 4 at the Commercial Court. NAMA has expressed concern for Treasury’s ability to fund proceedings should leave be granted for a judicial review and NAMA will seek “ringfenced” funds for the action. Paul Sreenan SC is acting for NAMA, and presumably the other defendants, the Attorney General and the State. Treasury has withdrawn one of its applications, to seek an injunction preventing dealings by NAMA’s receivers, a withdrawal which presumably places costs on Treasury. Treasury is continuing in its application for a judicial review of NAMA’s dealings with the loans. And despite being pencilled in for just four days, the case will continue next Tuesday.
NAMA Wine Lake 
Is this a landlord V tenant case?
I assume Treasury are using money, to pursue this case, that could be used to repay their loans i.e. money owed to taxpayers. Can’t loose really can they.
@Brian, companies are entitled to defend themselves from attempts at receivership and liquidation, but there’s a body of law devoted to ensuring the costs of such defences don’t prejudice the rights of creditors. This isn’t just with NAMA; for example McInerney in 2010 and 2011 spent a lot of money in trying to pursue an examinership and defend itself against a range of banks including KBC. It’s been some time since I had to deal with costs in a corporate insolvency, so if there are any legal professionals lurking hereabouts, they might enlighten us.
@NWL
“The position on here is that in principle, NAMA having acquired €1-2bn of loans – it’s unclear from reporting – seems entitled to foreclose on the loans if Treasury is in default. ”
Hell, that I thought too. Where on earth did we get that idea from?
@Joseph, as you (and the rest of us) are about to find out, a borrower does have rights in respect of his property, even if the borrower is in default on the loan – and by the way it looks as if there might be some debate about whether or not the Treasury loans are in default, certainly some of their buildings are well-rented.
How would you feel if the bank repossessed your house and sold it for a fiver, and came after you for the rest? How would your company feel if its future was jeopardised because a loan on part of the company only couldn’t be repaid on time?
@NWL
Lets clarify a few things.
A man’s home is his castle. There is no family home being repossessed in case of the ‘companies’ being put into receivership. So your point relating a ‘my house’ or indeed ‘your house’ is not valid in this case.
In relation to the future of companies being jeopardised by the inability to repay loans, this is happening all the time. There is no good feeling about it. I would have huge sympathy if there were hundreds of jobs at stake. But there has been no mention of jobs so far. At the moment it is all about it being terribly unfair to poor Johnny and Richard.[ref L’Eagle below]
Now as we both know property development companies were no strangers to the court process. It is said that some companies in the property business had a habit of lodging objections to developments until the original petitioner ran out of time and funds. When the original petitioners sold at a cash strapped price, guess who was able to come up with the readies.
Treasury may have ‘property rights’. So do the rest of us. But we now have a USC, Increased taxes, a property tax, a pension levy, children unemployed, cousins emigrated. And that is not to mention the three people who it is said were pulled from the Shannon in Limerick the weekend before last.
Let us hope that the court will strike a balance in favour of all our rights in this case.
@Joseph, I didn’t mean to personalise the example, just to illustrate the point :-)
But having said that, companies and individuals do share some rights when it comes to defaulting on loans, and the lender can’t generally treat any property subject to a loan without restriction, be that the a house or a factory.
Now there might be reason to call for changes to the law, but be patient and see how this plays out. The media may not be justified in talking up the imagined strength of Treasury’s position and you may find NAMA doggedly overcoming the detailed obstacles being placed in its way.
All Treasury are doing is wasting the scare resources of a bankrupt country. Their arrogance,ignorance and greed knows no bounds. Sad.
I spent a lot of money on booze, birds and fast cars. The rest I just squandered.
George Best
It sounds like fairly weak stuff so far for Treasury – a variation on the “this is terribly unfair” line that small scale borrowers have said repeatedly since the end of the CT and been told “tough luck” by the courts.
Standard practice for loans repayable upon demand – give one hour’s notice. One example (not all detail in this report): http://www.independent.ie/business/irish/receivers-seek-legal-advice-as-indebted-hotelier-refuses-entry-2533365.html
But everything sounds so much more plausible when Michael Cush SC says it out loud with perfect tone and cadence. Let’s see what stronger points he has left in reserve.
A little less conservation….REO insolvent,Opera likewise,Tresuary to be determined.Spousal transfers won’t at least be a issue here……with one of the partners….its a bout time,the party is over,here is the bill who is paying it the Irish Tapayer ?
What will the outcome be for NAMA from this?
@NWL
No problem. You gave me a much needed opportunity to blow off a little steam on this topic.
Still is not instructive that many seriously indebted people and companies can find the money to trot along to high court, a course of action that is prohibitively expensive for probably 99% of the population.
One wonders if NAMA accepted ‘business plans’ that included a legal expense item challenging their decisions in the high court.
Or was this legal expense item part of normal living expenses?
And if not either, where does the money come from to pay for it?
Have these so called investors the capability to actually fund any of these so called deals and in a timely fashion?
In addition to “balance sheet insolvent” (liabilities exceed assets), the other kind of insolvency is “cash flow insolvency” (inability to pay one’s debts as they fall due). A business may be one without being the other.
@Paul, thanks, that’s a new type of insolvency to me! Isn’t “cash flow insolvency” what is commonly called “illiquidity”? Or is there a special legal definition of “insolvency” which allows for a “cash flow” category?
Well, I’m no expert and it’s been a while … but illiquidity, I suppose, is a property of the assets a business holds that might well lead to the business being cash flow insolvent (even if it’s not balance sheet insolvent because ultimately its assets exceed its liabilities). As I recall quite dimly, there are two alternative legal definitions of insolvency, cash-flow and balance-sheet. Either one is sufficient to count as insolvency. You can see the distinction here, though I’m not sure whether this statute is the governing one these days: (http://www.irishstatutebook.ie/1963/en/act/pub/0033/sec0214.html) . The UK statute makes a cleaner distinction, (http://www.legislation.gov.uk/ukpga/1986/45/section/123) but I assume Irish law is to the same effect.
As I understand it, the balance sheet test allows one to take a more long term view, so that a petitioner doesn’t need to wait until the wheels are falling off to bring insolvency proceedings.
@gombeenland,from the IT ,NWL linked it-not all cash offers at suggested below 50% off face value of loans.
“Both those proposals required “significant” vendor financing by Nama, Treasury said.”
CIM no info available on the ‘offer’ terms.The most important development so far is the FT reporting on TCT.
@John, there will be a major blogpost in the next hour with details of the dealings with Hines and MacQuarie, as disclosed to the Commercial Court. Suffice for now to say the terms of the offers were not as attractive as the headline €600m and €622m figures bandied about might suggest.
@NWL ah now…..The biggest problem/issue for any new investor/buyer is the concentration of assets in Ireland.It was always curios that none of the ‘media’ ever asked Hines or Mac who have media relations departments for a statement,even a no comment response.Looking,forward to new post.