McKillen loses battle with billionaire Barclays
PROPERTY DEVELOPER Patrick McKillen could not have afforded to buy part of financier Mr Derek Quinlan’s shares in three London hotels in 2011, the High Court in London has ruled.
Mr Justice David Richards dismissed Mr McKillen’s claims that he had suffered unlawful or unfair treatment at the hands of the billionaire Barclay brothers in a battle to control the Berkeley, the Connaught and Claridge’s hotels.
In his initial pleadings, the Belfast-born developer said he had intended to buy all, or a proportionate share of Mr Quinlan’s 36.2 per cent holding in Coroin Ltd, a company set up in 2004 by Mr Quinlan to buy the hotels, along with The Savoy.
Subsequently, Mr Justice Richards said Mr McKillen had made clear “that he was not saying that he could have financed a purchase of shares out of his own funds”, but that he would “have raised funds to avail himself of any opportunity”. But the judge did not accept that Mr McKillen could have afforded to buy half of Mr Quinlan’s stake, which was then in its entirety worth £48 million (€61 million) if the hotel group was valued at £900 million, or £58 million if at £950 million.
Looking at Mr McKillen’s funding proposals, the judge said that one from hedge fund Och-Ziff Capital Management in May 2011 carried with it a 15 per cent interest rate, along with onerous conditions. Mr McKillen had even then been advised that an agreement was unlikely unless there was an “injection of new funds” by him from property sales elsewhere, and he had agreed in court that the terms were unattractive.
A deal reached between Mr McKillen and Qatari investors Al Mirqab in March 2012 could not have been agreed in 2011 because “the agreement is the product of the proceedings”, Mr Justice Richards declared in a 160-page judgment.
Most of the interest from investors including the Qataris “arose only after Mr McKillen started these proceedings”, which were “no doubt” perceived as “opening up the possibility that Mr McKillen could gain 100 per cent control of the company.
“This is striking given that Mr McKillen was seriously trying to arrange the necessary finance from May 2011,” said the judge, who will decide the issues of costs and leave to appeal when the courts resume in September.
Mr McKillen had argued that a bridging loan could have been found “on expensive terms” that “would be soon refinanced”, but “no adequate answer” had been forthcoming about how this could have been done.
“The evidence as to Mr McKillen’s overall financial position is such, I find, that he could not raise a conventional term facility for this. Even if his net cash flow was sufficient to service a facility, he could not offer adequate security,” said the judge.
Information about Mr McKillen’s property assets had been produced “in a very unsatisfactory form”, he said, while there was no evidence offered that any lender would have regarded them as acceptable security for loans.
Criticising the conduct of all involved, Mr Justice Richards said: “In due course, it transpired that the unauthorised disclosure of confidential information was endemic among all the shareholders, including Mr McKillen.”
The judge ruled that the directors appointed by the Barclays to Coroin’s board had not breached duties under company law, save that two, including Richard Faber, had “breached the duty not to put themselves in the position where there is a conflict of competing duties”.
One of them, he said, had communicated with Nama without disclosure to other Coroin directors. “These breaches of duty caused no loss to the company or prejudice to Mr McKillen as a shareholder,” the judge ruled.