Firm behind three London hotels at risk over McKillen action, court told

THE FUTURE of a £1 billion company behind London’s landmark Connaught, Claridge’s and Berkeley hotels is at risk because of an ongoing legal battle over the group’s ownership, a court was told yesterday.

London’s High Court is hearing a claim by Irish investor Paddy McKillen against the billionaire Barclay twins over ownership of the three London hotels.

Mr McKillen claims Sir David and Sir Frederick Barclay and their interests unlawfully purchased stakes in Coroin, the holding company that owns the three hotels. The Belfast-born property developer also claims the brothers impinged his rights as a director and shareholder after buying a 25 per cent stake in Coroin early last year.

Mr McKillen and failed Irish financier Derek Quinlan bought the hotels in 2004 with a consortium of other investors. The group signed a pre-emption agreement which stated that shares in Coroin had to be offered to other shareholders before they could be bought by third parties.

Mr McKillen claims the brothers purchased Mr Quinlan’s debt and used his stake in Coroin as security – in breach of the 2004 shareholders’ agreement.

The National Asset Management Agency is a party to the hearing after it sold Coroin’s £660 million debt to a company controlled by the Barclay brothers’ group of companies.

Representatives of the brothers have denied all allegations, with two of them claiming the legal dispute is putting Coroin’s “future at risk”. Rigel Mowatt, a director in Coroin and trusted Barclay brother lieutenant, told London’s High Court yesterday the dispute has hindered the board’s effort to refinance its debt. He said: “It would be very difficult to refinance the company with the shareholders not in agreement.”

Mr Mowatt said the funding shortfall of the hotels was up to £200 million.

While fellow director and Barclay brother executive Michael Seal said the company’s debt position “remained unsatisfactory”, as long as the dispute between the shareholders continues, it will be “impractical to obtain refinance”.

In his witness statement lodged with the court, Mr Seal said: “In the light of the dispute between the shareholders, it has not, as yet, been possible for the board of directors of Coroin to take steps to reduce Coroin’s high level of indebtedness or to put its borrowing on a secure footing.”

Joe Smouha, barrister for both men, told Mr Justice David Richards the litigation was causing a “major problem” for Coroin and a timetable for cross-examination needed to be adhered to. He said: “As you have heard in evidence, the legal action is causing a major problem with the company in terms of moving forward.”

But, in cross-examination, it emerged Mr McKillen had attracted a “good lead” on an offer to refinance from Deutsche Bank.

The High Court has retired for its Easter recess and the new term will begin on April 17th.