Take Paddy McKillen, pictured below right.
In 2010 and 2011, he fought tooth-and-nail in Dublin’s High Court and Supreme Court to stop NAMA acquiring his loans. In the end, the Supreme Court judges decided that NAMA could acquire Paddy’s loans but would have to consult with him beforehand. Despite swearing blind at the High Court that Paddy’s loans were “systemic”, NAMA abandoned the fight and decided not to acquire Paddy’s loans which remained at IBRC and Bank of Ireland.
Lucky for Paddy.
Because right now, Paddy has been given a window to refinance his IBRC loans – estimated to be €300m of personal loans and €550m of corporate loans. To refinance his loans, Paddy must repay them 100% and Paddy has been having a whinge through the press recently that IBRC is not accepting his most generous offers which are almost equal to what Paddy owes. Paddy’s window to refinance at 100% expires soon; originally, the liquidator at IBRC was going to have the loans valued by the end of May 2013 and they would then be offered to the market, unless they had been refinanced at 100%. That valuation of the IBRC loans by USB and PwC due at the end of May, seems to have slipped but regardless, it will be a matter of weeks when the un-refinanced loans are offered to the market.
Why is Paddy lucky? Because, even after his refinancing window closes, he will be able to bid for his own loans, and if his bid is the highest and if the bid is in excess of the independent valuation, then Paddy will be able to acquire his loans at a discount. So IBRC into which we have shoveled €34bn will be selling its loans to the market, and if the borrower is the highest bidder for those loans then the loans will be sold to the buyer at a discount, or in other words, the borrowers will receive debt forgiveness or a debt writedown.
To illustrate, if Paddy has personal loans of €300m today, he can refinance these today at 100%, that is pay IBRC €300m and any outstanding interest and fees. After the refinancing window closes, then IBRC will offer Paddy’s loans to the market and say the highest bid is €200m and this is in excess of the market value of the loans, then they will be sold to that bidder regardless of who that bidder is. If it’s Paddy, then he gets €100m of debt forgiveness, no questions asked.
Contrast that with NAMA which is prevented by the NAMA Act from selling assets back to debtors below their par values. So, if a NAMA debtor owes NAMA €300m and offers NAMA €200m for them, and if NAMA markets the loans and €200m remains the highest bid, then NAMA can NOT sell the loans to the NAMA debtor. Which brings us to Sean Reilly (pictured top above, left) who happens to owe NAMA about €300m according to press reporting. Sean is prevented by the NAMA Act from having an interest in buying these loans. The best Sean can do is show some leg to potential investors and try to get them interested in bidding for the loans, and the best Sean can hope for is to act as a consultant after the loans have been sold to someone else.
Minister for Finance Michael Noonan is clueless about all of this, he doesn’t know how much the NAMA proscription is costing NAMA and by extension the State. He also doesn’t know why there is one rule for IBRC disposals and another entirely for NAMA’s.
What an eejit, and given he is being advised by the Department of Finance on these policies, what a bunch of eejits are employed there.
The Minister was responding to a parliamentary question from the Sinn Fein finance spokesperson Pearse Doherty. The response must count amongst the most nonsensical you’re ever likely to see.
Deputy Pearse Doherty: To ask the Minister for Finance the reason the Irish Bank Resolution Corporation borrowers will be eligible to buy their own loans at less than par value when such loans over €10m are offered to the market imminently, but that borrowers at the National Asset Management Agency are precluded by the NAMA Act from buying their own loans at below par value..
Minister for Finance, Michael Noonan: As previously advised, independent third parties are being engaged to independently value the loan assets of IBRC (in Special Liquidation). There is an obligation on the Special Liquidators to ensure that assets of IBRC are sold at a price that is equal to or in excess of the independent valuations that are being obtained. A process is currently being finalised that ensures that maximum value is extracted from the loan sales. The Special Liquidators are responsible for putting in place a liquidation process which fulfils their obligation under the IBRC Act and where applicable the Companies Acts. It is a matter for the Special Liquidators to determine what bidders constitute qualifying bidders for the purposes of the sales process.
The protocol which is in place for the disposal of the IBRC assets is guided in a specified manner as the Special Liquidator will only be holding the assets for a limited period of time. Any assets that are not sold to third parties for a value higher than the independent valuations will be sold to NAMA at that price. Assets that are transferred to NAMA will then be subject to the protocol according to the NAMA Act 2009.
It is the objective of NAMA in any loan sale to achieve its commercial mandate of obtaining the best financial return on behalf of the State. In accordance with the NAMA Act procedures have been put in place by the Agency to achieve these objectives.
NAMA Wine Lake 
It’s pretty clear that all of the failed businesmen are simply playing with monopoly money at the expense of the rest of us. They don’t even have the decency to declare themselves bankrupt. They are basically the direct descendants of the Ascendancy classes who have ruined this country throughout its history.
As McKillen said to the High Court and Supreme Court all his loans are performing and he will repay 100% plus interest. If this is the case then why would IBRC, NAMA, KPMG accept any less? Accepting less would result in a loss to the tax payer and give a subsidy to McKillen from the Irish tax payer which seems stupid as he claims he doesn’t need it. Sure he just gave his son a house in California for $40m; no wonder he wanted to stay out of NAMA’s clutches. How Spring and Angsley allowed this is beyond comprehension.
If McKillen wants to pay all his debts then he is free to do so, unless he’s looking for a discount. Why should the tax payer take a discount when McKillen can give his son a house worth $40m?
What is McKillen afraid of with NAMA if all his loans are performing, as he has claimed in court. NAMA can do nothing to Mckillen as long as his loans are performing, or am I missing something? By his actions it looks like they not performing and if not, were they not performing when he said they were to the Irish courts? If so then surely it is time for the DPP to investigate?
@D Con, the house you’re referring to on Oriel Drive in Hollywood Hills was apparently bought for USD 9m, seems much of its value might be down to the refurbishment of the house.
http://www.independent.ie/business/irish/mckillen-gave-son-deeds-to-mansion-28894984.html
NWL, this does not add up at all. Someone had to pay for the refurb and that wasnt done in the 6 months since Paddy gave this to his son, any refurb that adds 31 million must have cost at the very least 20 million. This looks like an old fashioned transfer of assets to a family member to keep it away from creditors.
And why did IBRC fund his Maybourne legal fees if Paddy felt he could give away an asset worth 40 million? No wonder they were liquidated.
@D Con, according to Paddy’s spokeswoman quoted in that Sunday Independent report last November
“No Irish bank has or had any interest in this property and it has no relevance whatsoever to Nama, IBRC or the Irish State”
If Paddy’s loans were all performing, why would such an asset transfer be an issue, though performing should mean that LTV covenants were being met.
IBRC did not fund Paddy’s legal fees. Paddy sought an emergency loan which was approved, but Paddy then sourced the funding elsewhere.
What the law says:
The European Convention on Human Rights is very clear on the issue, even if our Michael Noonan is not:
Article 14: Prohibition of discrimination
The enjoyment of the rights and freedoms set forth in the European Convention on Human Rights and the Human Rights Act shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.
In other words, you cannot legally legislate against the debtors purchasing back their loans if they make the highest bid. So while Noonan may obfuscate, he is way off base.
Discrimination occurs when one person is treated less favourably than another person in a similar situation and this treatment cannot be objectively and reasonably justified.
It is important to understand that the Human Rights Act does not protect someone from discrimination in all areas of their life. Instead it protects them from discrimination in the enjoyment of those human rights protected by the European Convention of Human Rights. This reflects the core idea that ALL of us, NO MATTER WHO WE ARE, enjoy the same human rights and should have equal access to them.
The protection against discrimination in the Human Rights Act is not free-standing. In other words, in order to rely on this right, you need to show that your ability to enjoy one or more of the other rights in the Human Rights Act has been affected by the discriminatory treatment. However, you do not need to prove that this other human right has actually been breached.
The courts have also established that the human rights protection from discrimination includes indirect discrimination. Indirect discrimination occurs when a rule or policy that appears to apply to everyone equally actually works to the disadvantage of some groups. For example a requirement that all employees be over six feet tall may be indirect discrimination where it is not strictly required for the job, since women and people from some race groups will be disadvantaged.
Not all differential treatment is discriminatory. Sometimes it is legitimate to treat people differently. For example, a court can impose a sentence on someone who has been found guilty of a criminal offence. In this situation, the court will treat this person differently to someone who has not been convicted of a criminal offence, but this is permissible because the less favourable treatment can be objectively and reasonably justified according to our criminal justice policies.
The problem with the NAMA debtors is that most are suffering post traumatic stress disorder from their experience over the last few years and are incapable of reaching for their lawyer to challenge Noonan and the bully boys that prevent them enjoying the rights every other citizen enjoys. But eventually someone will gather enough courage to do it and cause embarrassment to the government for its inexcusable action that is abusing the debtors’ human rights as legislated for under the ECHR.
Shame on Michael Noonan for dodging Pearse Doherty’s question and continuing a populist but illegal policy.