Ruling leaves Lynch facing reality of soured deal after three-year battle

Yesterday's Supreme Court ruling left one of the Republic's best-known businessmen, Philip Lynch, facing a €26 million bill for a property deal done at the height of the bubble era that was meant to deliver a quick profit, but instead rapidly turned sour.

The ruling marked the end of a court battle that began three years ago when AIB obtained a judgment for €26 million against Lynch, his family and property developer Gerry Conlon after they failed to repay a loan given in 2007.

While the court said that his family, wife Eileen and four adult children, Judith, Paul, Philippa and Therese, are entitled to challenge whether or not AIB can pursue them for the judgment, it dismissed Lynch’s appeal, leaving him on the hook for the full amount.

He did not comment afterwards, saying that he needed time to read the judgment, which runs to 24 pages.

The deal that has left Lynch with this liability was done at the height of the property bubble. In 2006, Conlon enlisted him as a partner in the purchase of 86 acres at Kilbarry, close to Waterford, whose value the developer believed would rocket to €70 million, as the local authority had earmarked it for rezoning in a draft development plan.

AIB had already exceeded its own guidelines in loaning Conlon hundreds of millions of euro, so it wanted him to bring in a partner. In early 2006 he turned to Lynch, the widely respected head of of investment group, One51. He quickly agreed to come in. The pair put a €5 million deposit on the site, money they intended to take back later from the loan that would be used to finance its purchase.

The bank gave 100 per cent, interest-only funding, secured against the property, but with the right, or recourse, to pursue the borrowers to recover the cash if there were difficulties with repayment.

Lynch subsequently claimed he would not have agreed to a full recourse loan and said that the terms limited the security to the property itself, with no recourse to the borrowers.

Nevertheless, his daughter Judith, who had power of attorney for her parents and siblings, signed on their behalf on February 8th, 2007, a day after Conlon. The loan was drawn down and the deal was done.

The land was rezoned in 2009, but by then the property market had collapsed, bringing the Republic’s banks with it. By the time that AIB sought judgment against Lynch and his family in 2011, the Kilbarry site was worth somewhere between €4 million and €5 million.

Lynch forged his reputation during 20 years as chief executive of IAWS, now known as Aryzta. When he took the helm in 1983, it was a struggling supplier of animal feed and fertilizer to farmers. He grew the business rapidly, swallowing its rivals, floating on the Dublin market in 1988 and shifting into consumer foods in the 1990s. When he left in 2003, sales topped €1 billion.

He subsequently took over One51, the old IAWS co-op entity, which had shares in the food group. For a while he looked to have succeeded, the group made had a stake in NTR which in 2007 made €70 million from the sale of Airtricity to Scottish and Southern Energy. However, after a series of less lucrative ventures, shareholders ousted him in 2011, shortly after AIB got its initial judgment.