Consortium's arrears and delays tested bank's patience

BACKGROUND: By the time Ulster Bank demanded full payment, €291,000 had accrued in interest and fees

FORMER IRISH Nationwide chief executive Michael Fingleton paid €42,875 to Ulster Bank to cover interest on a €13 million property loan in July 2009, three months after he resigned from the building society.

Mr Fingleton’s cheque bought time for him and his fellow investors – Fianna Fáil Senator Francie O’Brien and Monaghan businessmen and developers Noel Mulligan and Charlie McGuinness.

The four men had drawn a €12 million loan from Ulster Bank in July 2006 to buy a 50-acre development site at Swellan on the Farnham Road, just outside Cavan town. The loan was provided on a facility letter issued to the men through Mr O’Brien’s address at Corwillan in Castleblayney, Co Monaghan.

The site offered much potential at the height of the property boom. It was located near Cavan town, near the new bypass and Farnham Estate, where the Radisson Blu hotel is now located.

By May 2008 the site remained undeveloped, and Ulster Bank agreed to issue a new loan facility to the four men covering €13.2 million plus an additional €500,000 to provide for the roll-up of interest.

A statement on the loan account, which was among filings submitted to the court, shows that Mr Fingleton’s €42,875 cheque in July 2009 was the first interest payment in a year on the account.

Three further payments – for €26,811, €34,842 and €34,769 – were paid to the bank to cover interest up to the end of November 2009.

Frustrated at the interest building up on the loan, the bank had set a condition on the new loan the previous year – the bank wanted evidence by August 31st, 2008, that a contract had been agreed by the four men to sell part of the site to a party named “Bennetts” at a price acceptable to the bank, or that a residential planning application to Cavan County Council had been submitted.

Ulster Bank even had trouble getting agreement on this new loan facility. The bank wrote to the men, again at Mr O’Brien’s address, in July 2008 demanding that the new May 2008 facility letter be signed and returned.

“The continued delay in returning this letter to us is unacceptable,” the bank’s senior manager Seamus McCabe wrote to the four men. This new loan facility was later returned signed by the four men.

A year later, on July 28th, 2009, Ulster Bank senior manager Mark Bradley wrote to Mr McGuinness confirming receipt of Mr Fingleton’s cheque. Mr Bradley said he had raised requests made by Mr McGuinness at a meeting in the bank’s head office in Dublin the previous June 18th during “high level discussions within the bank”.

Mr Bradley demanded a €120,000 payment to cover partial interest from January to June 2009 and “satisfactory evidence regarding zoning/planning progress on the site against specific timeframes (to be agreed)”.

The payment of the €120,000 interest “is of particular relevance and seems to be the main issue between us at present”, wrote Mr Bradley. “The bank notified you in writing in May and November 2008 and on numerous occasions this year [that] we would not grant further interest roll-up.

“The fact we are willing to seek a partial payment of €120,000 is a considerable compromise on our part and no further dilution will be permitted.”

By March 2010, the loan balance stood at €13.535 million with arrears on the loan standing at €285,000. In a letter of March 3rd, Ulster Bank demanded current net worth statements and a copy of November 2009 tax returns for each of the four borrowers, following a meeting on February 24th and in advance of the four men making a proposal for repayment of the outstanding interest arrears by March 10th.

The bank noted it had received a letter from their architects outlining a plan for a proposed nursing home or creche on part of the site “which would ratify the commercial rezoning of the entire site”.

By June 2010, the amount owing to Ulster Bank had reached €13.54 million including €291,000 in accrued interest and fees, and the bank demanded repayment of the full sum. With no payment forthcoming, Ulster Bank issued proceedings against the four men on July 26th, 2010. The amount owing had reached €13.65 million at September 13th, 2010.