There is deep concern on here at the special liquidation of IBRC which will see some €16bn of assets disposed of, or transferred to NAMA over the next six months* The disposal of the assets is taking place behind a curtain of secrecy and Minister for Finance Michael Noonan refuses to extend NAMA’s anti-lobbying rules to the IBRC liquidation, which means what stands between these assets and shenanigans is the professionalism of the special liquidator, Kieran Wallace of KPMG. KPMG has appointed UBS and PwC to value the loans but Minister Noonan refuses to publish the request for procurement citing commercial confidentiality. We don’t even know what the assets IBRC would have had in February 2013, because Minister Noonan refuses to publish accounts for the second half of 2012, so the latest reporting we have on IBRC is for the six months ended 30th June 2012.
We are still apparently at the phase of the IBRC liquidation when existing borrowers at IBRC can refinance their loans; and when this phase is over, the loans will be offered to the market at no less than the valuation placed on the loans by PwC and UBS. So, right now, IBRC’s borrowers are scrambling about to refinance their loans, we believe at 100% of their par values, though Minister Noonan refused to confirm last week if all refinanced loans were repaid 100%, citing commercial confidentiality.
And the most vociferous of the IBRC borrowers by a country mile has been developer and businessman Paddy McKillen who gets a platform in today’s Irish Times – here and here – to attack the IBRC special liquidator, the Department of Finance and NAMA. Paddy is reported to have offered to pay €180m upfront for loans with a par value of €800m, with the remainder repaid in full by 2016. Trouble is that IBRC is being wound down now, and by 2016 should be just a bad national memory. So it is unclear what Paddy expects IBRC to do with his loans between now and 2016 – he has previously fought a battle against NAMA to stop his loans being taken over by the Agency, so does he expect IBRC to be kept open specially for him?
The Special Liquidator at IBRC is reported by Paddy in the Irish Times to have declined the €180m upfront offer so Paddy has a platform to have a whine and make all sorts of claims but the Special Liquidator’s position is not reported. A request for comment was made to Kieran Wallace this morning but there was no response at time of writing, and the likelihood is that no comment will be forthcoming on a specific loan anyway.
You will be hard-pressed to find any greater display of chutzpah in the media today than when Paddy is quoted as saying : “One billion euro of that amount [€2.1bn] has already been repaid to the State at full value” Paddy is seemingly referring to his borrowings from Irish banks. But, this presumably includes the €800m “repaid” after NAMA sold €800m of loans in the Maybourne group, to the Barclay brothers. Even though he eventually lost, Paddy, memorably, went to court in the UK to stop that transfer! Paddy was asked to comment on the €1bn repayment and for an outline of his repayment plans between now and 2016, but at time of writing there has not yet been a response.
What we all know is that some of Paddy’s IBRC loans relate to his stake in the Maybourne set of three luxury London hotels, Claridge’s, the Berkeley and the Connaught. And the Barclay brothers who own 28% of Maybourne, and have received support from Derek Quinlan’s 36%, have made no secret of their desire to acquire Paddy’s 36% stake or at least dilute him to such an extent that his influence as a minority shareholder would be nugatory. It has been reported that the Barclays would be prepared to pay in excess of the market value for Paddy’s Maybourne loans, and no doubt, Paddy will use all his considerable acumen to prevent that from happening.
But negotiating through the national press with a Special Liquidator that is presumably constrained in his ability to comment? Paddy has a right to refinance his loans right now at 100% and no-one, not Minister Noonan, Secretary General Moran, Special Liquidator Kieran Wallace nor NAMA’s Brendan McDonagh can stop Paddy in doing that. Meantime, they all have the duty to maximize returns from these assets.
* The original plan was for most of the unsold IBRC loans to be transferred to NAMA in August 2013, but press reporting has since suggested this has slipped, and Minister for Finance Michael Noonan has refused to provide an updated estimate.
UPDATE: 5th May, 2013. In the Sunday Independent today, Tom Lyons provides additional information on Paddy’s negotiations. He claims that the offer to refinance the €180m of loans was at “a relatively minor single digit write down”. A 9% write down would equate to about €16m, but we don’t know the “single digit” so it might conceivably have been €1.8m, which is still significant to a man who reportedly sought approval of what the Sunday Times last week called an “emergency loan” from IBRC in October 2012 of GBP 5-5.9m (€5.9-€7m). The Sunday Times indicates that although the facility was approved, it was never drawn down by Paddy who had other options. So there are mixed messages from the incident with suggestions that Paddy was in a corner financially, but at the same time, Paddy had options and didn’t need draw down an approved loan.
Tom writes in the Sindo today that the refinancing offer was “provisionally agreed” with IBRC in December 2012 but that the Special Liquidator of IBRC, Kieran Wallace has subsequently been holding firm to the position that refinancing be at 100% until such time that the loans are independently valued and offered to the market. Despite Minister Noonan’s refusal to confirm this was the case two weeks ago, citing commercial confidentiality, I also understand that it is KPMG’s position that loans be refinanced at 100% only in the refinancing window which will expire shortly.
Eyebrows might be raised in some quarters at the claim in Tom’s report that Paddy’s 36-7% stake in Coroin, the company that owns, the three hotels might be worth €200m. Even after the rights issue late last year, that looks ambitious for what remains, when you strip away the razzamatazz surrounding three lumps of performing bricks and mortar in central London, a heavily indebted company producing relatively modest profits.