Tycoon’s battle to honour €300m debt

The topic of conversation was Black Monday. A relaxed Tony O’Reilly was wearing a pair of boat shoes – no socks – as he sat on an armchair in the elegantly decorated drawing room of Castlemartin, his beautifully restored Kildare mansion.

His first wife Susan served the coffee while he chatted with Sunday Independent business correspondent Martin FitzPatrick. FitzPatrick was there to conduct his annual interview with his boss.

It was 1988 and a year earlier on Monday, October 19th, 1987, Wall Street had collapsed. O’Reilly, FitzPatrick recalled, was insightful and brilliant on the reasons for the crash. His top-level connections to American politics and business meant he already knew what a US government report into the debacle would conclude and he was more than happy to share this.

"He was the best interviewee I ever encountered. I met hundreds of people, even Bill Gates, but there was nobody like O'Reilly," FitzPatrick said. "He was wonderfully talented. He could anticipate your questions and he spoke in sentences, with paragraphs and punctuation. It was perfect copy."

Back then O'Reilly was on top of his game: a sports star, he had swiftly conquered Irish business and moved on to the United States where only two years earlier he had been made chairman of Heinz, succeeding HJ Heinz II, the first non-family member to hold the position.

“He was impervious, a god on the stock market, and someone you never would have thought could fall,” FitzPatrick said this week.

Twenty-six years later, last Monday was a black one for Tony O’Reilly. In court Allied Irish Banks, one of nine banks to which he cumulatively owed €195 million, was seeking a personal judgment against O’Reilly for €22 million.

First in queue

In one afternoon, legal counsel for AIB three times called Ireland's once richest man "insolvent". AIB said the reason it was taking an action against O'Reilly was to ensure it was "first in the queue" to enforce debt proceedings in the future.

O'Reilly did not dispute the debt but asked for a stay of six of months to allow him to sell off his remaining assets in an orderly way. Mr Justice Peter Kelly has until today to decide whether to grant O'Reilly his wish. Last Tuesday, on the front page of the Irish Independent, a paper O'Reilly once owned, he was called "broke". It has been a hard fall. After decades on the rise, O'Reilly has become "insolvent" within about six years.

The two biggest financial bets of O'Reilly's career – Independent News and Media and Waterford Wedgwood – eventually proved the catalysts for his downfall. The former billionaire could probably have survived losing either one of those bets, but not both.

As a result of these losses, by 2010 O'Reilly – with Bernard Somers, his long-time adviser and once a director of INM – was locked in talks with his banks to try to find a solution. O'Reilly's personal and investment company borrowings stood at just over €300 million. Some of his loans were heavily underwater while others were ratcheting up interest.

O'Reilly owed money to ACC, Bank of Ireland, Ulster Bank Ireland Ltd, Mellon Bank, EFG Bank, Trust Bahamas Ltd, Lloyds TSB Bank, Anglo Irish Bank and AIB. His banks wanted to agree a repayment plan.

It was not all gloom. O'Reilly had shares in Heinz, Independent News & Media and Providence Resources and other stock. He owned a good chunk of Landis + Gyr, a Swiss-based electricity metering company, and he had artworks including a Monet called Le Portail (Soleil). On top of that, he had property including his Castlemartin estate in Kildare, a house on Fitzwilliam Square in Dublin, a holiday home in Cork and a mansion in the Bahamas.

The problem, his banks realised, was that he had already borrowed against some of these assets. His bankers knew they were facing losing money. But Somers managed to convince them to work with O’Reilly, not against him.

“O’Reilly characteristically played it with a straight bat,” a banking source said. “We decided to wait and let him work through things behind closed doors. This made sense . . . nobody wanted to take him down publicly, partly out of respect for the man, but also pragmatism. A fire-sale would be bad for everybody.” The banks agreed a “forbearance” arrangement with O’Reilly, to give him three years to realise his assets and pay them back.

In return, O’Reilly gave some of his banks additional security. For example, he had two loans with Anglo Irish Bank. One of about €55 million was secured only on his INM shares, and the other of about €10.5 million was related to losses supporting Waterford Wedgwood. O’Reilly gave Anglo full personal recourse and gave it new collateral, his 7 per cent stake in Landis + Gyr.

Similar deals were done with other banks depending on their position. The sale of Landis for €1.6 billion was his first big win. O'Reilly's son Cameron had built up the business since 2004 when his investment company Bayard bought the Swiss firm.

O'Reilly was a big shareholder along with Australian media tycoons Kerry Stokes and John B Fairfax, and the sale realised tens of millions to pay down debt. Borrowings from State-owned Anglo were reduced from €70 million to €30-odd million, mainly with the proceeds from this sale.

Selling Heinz

Next was Heinz. O'Reilly had sold down his shareholding over the years but still had a substantial residual holding. In February 2013, Heinz was sold for $23 billion to Warren Buffett, who said he did it after hearing O'Reilly tell tales about it around the table at the home of Washington Post publisher Katherine Graham. Again, O'Reilly used his gains to repay debts.

Hopes that Providence Resources, which in 2012 was reported to have found €1.6 billion worth of oil off the Cork coast, might find a buyer however came to nothing. O’Reilly’s banks had security on his shares in the resource company, but it made no sense to sell.

INM was even worse. At his peak, O’Reilly’s shares were worth between €900 million and €1 billion and, over the years, he had borrowed against them. Earlier this year, ACC made him sell half his shares, raising a few million, and his remaining holding is in the control of his other banks.

In an effort to stave off his banks, O’Reilly was forced to sell his house on Fitzwilliam Square and put his family holiday home in Cork up for sale. Meanwhile, he prepared to put Castlemartin on the block, and ordered estate agents to prepare for this.

His remaining assets, including a share in an investment company and assets in the Bahamas and the British Virgin Islands, will also have to be sold.

Ivor Kenny, who first met a young O'Reilly in 1962 and was later a director of INM from 1986 until 2009, said O'Reilly's achievements should not be forgetten and he remains a ground-breaking colossus in Irish business.

In the end O’Reilly overstretched. “To the new generation of people, it may be Tony who? But to others, he was an inspiration, and what is happening now is deeply shocking, and a great tragedy.”