Paddy McKillen’s appeal in London’s courts concluded three weeks ago with judgment reserved.
The UK satirical magazine Private Eye – in the current issue, City News at the back – reports on an aspect of the case which seems to have been overlooked in the Irish media, which had fielded an impressive two reporters to attend the three day appeal. The overlooked aspect is the continuing financial miracle that is Mr Derek Quinlan.
The magazine reports that Paddy McKillen’s barrister Lord Goldsmith told the court during the appeal that Derek has three separate judgments against him for €50m, €6.5m and €3m and has had his yacht and art collection repossessed. The barrister also stated that although the Barclay brothers had acquired Derek’s loans from NAMA and others that were secured on Derek’s shares in the Maybourne group of hotels, that the Barclays were not charging Derek interest on the loans which are for tens of millions. Not only that, but the Barclays had given Derek and his wife personally sums of €1m and GBP 1.86m (€2.2m) and only €500,000 was characterized as a loan.
And yet, Private Eye notes, Derek managed to be represented by three learn’d friends at the recent three day appeal. Private Eye says that Derek is bankrupt even if he hasn’t been bankrupted. It also questions why NAMA has not moved to bankrupt him.
One person who would just love to see Derek bankrupted is Paddy McKillen of course. If that happened, then Derek’s 36% stake in the hotels would be offered to Paddy who already owns 36% and the Barclay brothers who own 28%. Paddy would snap up his entitlement which would give Paddy majority ownership of the hotel group.
And Paddy would probably love to see this bankruptcy sooner rather than later, because Paddy has very large pending financial commitments – not only is IBRC flogging off his personal loans estimated to be around €300m and his corporate loans which have been reported to be €550m, but Paddy mysteriously came up with the readies to pick up his share of a rights issue last December 2012 which cost him over €60m. Last Sunday, the Sunday Business Post reported that the Barclay brothers were making it clear to IBRC that they would be bidding for Paddy’s loans when the Special Liquidator puts them up for sale, and that they were prepared to offer a premium over the market value. And Paddy’s funders for the rights issue – speculated upon to be New York based – will be looking for their pound of flesh and an exit as well. Paddy also faces €25m of legal costs from this battle with the Barclays though it is understood that he has paid a portion of these. Of course the slate for these costs may be wiped clean if Paddy wins his appeal, with judgment expected any day now.
Private Eye’s angle in its reporting is presumably coloured by its antipathy towards the Barclay brothers-owned Telegraph newspaper, dubbed the Torygraph by the liberal Private Eye and also the piercing of hokum, and the Barclay brothers characterization of financial support for Derek as nothing more than helping out a friend in need possibly falls under this heading – for chrissakes, despite the millions in benefit provided by the Barclays to Derek, they still can’t even spell his name correctly, referring to him as “Derrick”.
Private Eye is unlikely to be overly concerned for the interests of the Irish taxpayer but it does ask (again) why NAMA is keeping Derek financially alive whilst he continues to live a life of apparent luxury.
NAMA, however is not known for its philanthropy towards developers, though the Agency has yet to bankrupt anyone and last year in a parliamentary question on NAMA and its bankruptcy dealings, Minister for Finance Michael Noonan said that “it is worth noting that bankruptcy proceedings are rarely brought by secured creditors and usually in cases of non or lack of full disclosure.”NAMA has already foreclosed on a range of Derek Quinlan property already.
So if NAMA is “keeping Derek alive”, it is doing so for financial reasons. Hopefully NAMA also considers the financial benefit of bankrupting, or threatening to bankrupt, Derek now. The Barclays are likely to pay a premium to stop that, and Paddy McKillen would probably pay something for it to happen. But is this a bidding war that NAMA has the cojones to entertain, and does it realize that a premium on Derek’s head has an expiry date?
Lastly, and this is unrelated to the Private Eye reporting. When Ian Kehoe reported last Sunday that the Barclays were willing to pay a premium for Paddy McKillen’s loans at IBRC, it was unclear if that included a premium on top of the par value of the loans. So if the loans had a par value of €300m, might the Barclays pay €305m. NAMA continues to be adamant that the most it can receive for a loan is the par value, and that is why it sold the €800m of Maybourne loans to the Barclays in 2011 at par, and not a penny more. If it transpires that the Barclays as special purchasers do pay more than the book value of IBRC’s loans, then Messrs Mulcahy and McDonagh should hang their heads. We’ll see.