“In the same email and with remarkable prescience Mr Faber said “this is a soap opera and has a few chapters left to run”. I doubt whether Mr Faber then realised quite how many chapters were left to run.” Mr Justice David Richards’ judgment in the Paddy McKillen case with the Barclay brothers in London’s High Court.
You have to feel some sympathy for property investor, developer and businessman Paddy McKillen as he spends this weekend nursing the wounds inflicted by Friday’s judgment in the UK’s High Court. Paddy lost his legal bid to have the behaviour and dealings of the Monaco-based billionaire Barclay twins – the 77-year old Sir David and Sir Frederick – declared unlawful, which means on this Sunday morning the Barclays own 28% of the Maybourne group of three hotels in London – Claridge’s, The Berkeley and the Connaught – and they own €800m of debt owed by the company, and they own debt secured by most of Derek Quinlan’s 36% shareholding. They can now call in the €800m debt tomorrow and indeed there are reports this weekend that this may be in prospect, which would force Paddy into a corner despite his 36% shareholding in the group.
The judgment from Mr Justice David Richards is curious in many ways. Its omission of Paddy’s cast of legal representatives from the title is no doubt an oversight, references to the “National Asset Management Authority” and Bank of Ireland (Scotland) are no doubt down to stretched checking of the judgment which runs to an extraordinary 160 pages, the judge’s occasional reference to one of the Barclays in the familiar “Sir David” is noticeable as is his confidence in their probity
“I am wholly unpersuaded that the Barclay brothers would begin to contemplate the payment of fees running to many millions of pounds of fees or that Mr Quinlan or Mr Murphy would think it sensible to suggest it.”
His repeated use of the term “fanciful” to refer to Paddy’s evidence and claims, must be hurtful to Paddy, but what is perhaps most remarkable is that the judge did not see the payment by the Barclays of up to GBP 4.6m (€6m) to the Quinlans – people claimed by the Barclays to be “friends” yet Derek Quinlan is repeatedly referred to as “Derrick” in texts from the Barclays – as antecedent to, or conditional on acts by the Quinlans which would trigger a shareholder pre-emption agreement which would force Derek Quinlan to offer his 36% shareholding to Paddy.
“Gerry, deal done with Greens, O Danny Boy, H. E. SIR David your friend”. The second sent a few minutes later read: “will need your help with nama, PM nows wants to meet with richard, I will now standby derrick and family and help him in every way i can on the road back to recovery, David”
Curious, and perhaps Paddy is perplexed by the judgment this weekend. He seems still defiant, confiding in the Sunday Independent’s Ronald Quinlan that he will fight on to ensure that Derek Quinlan’s 36% shareholding in the hotels is offered to him, should it be disposed of by the financially distressed Derek.
On the other hand, the cold reality is that Paddy – a man whose personal wealth was estimated at, the not insignificant but hardly top-table, €75m in 2009 – faces a €20m legal bill, if full costs from the case are awarded against him, according to the Barclay brothers’ Daily Telegraph. Paddy’s 36% shareholding in Maybourne is impressive but as was repeatedly pointed out during the court hearing earlier this year, Maybourne needs €200-250m of new equity, and if Paddy can’t come up with the readies, he faces seeing his stake diluted to a level with which the Barclays might be comfortable – “less than 10%” was indicated to be acceptable in documents presented to the court. So Paddy may see control of the hotels slip from him as he himself reduces to a nugatory minority shareholder. Of more immediate concern might be the Barclays acting to enforce the €800m loans they acquired from NAMA.
The secretive Paddy was forced to disclose at the hearings more about his wealth and property than he would have liked. And despite the reluctant disclosure, the judge still concluded that Paddy would not have the funding himself to acquire Derek Quinlan’s shares, and indeed were it not for the legal proceedings the judge concluded that Paddy would not have access to the funds from third parties at all.
“The evidence as to Mr McKillen’s overall financial position is such, I find, that he could not raise a conventional term facility for this”
Now that Paddy has lost his case with the Barclays, it remains to be seen if any of the apparent offers of funding remain on the table. Paddy appears to be saying today that the Qataris are still “in”. Paddy may continue to throw shapes about the €1.3bn “enterprise value” Maybourne group of hotels which by his own account he has expended “blood sweat and tears” but it looks as if Maybourne is set to slip from him. If Derek Quinlan’s 36% stake was worth GBP 45-60m (€57-€76m) as indicated during the hearings, then that may be what Paddy finds his stake to be worth also. And Paddy still has a colossal exposure to Anglo/IBRC and Bank of Scotland (Ireland), revealed in the hearings at “up to €370m”. Perhaps not the end of the road, but Paddy might be about to commence a very difficulty chapter indeed.