Judge challenges McKillen stance on £660m debt sale

BONUS PAYMENTS from Qatari investors interested in buying three luxury London hotels would have been “far more attractive” to financier Derek Quinlan than promises to forgive his debts by the billionaire Barclay brothers, a judge in London said yesterday.

The declaration was made by Mr Justice David Richards during property developer Patrick McKillen’s challenge both to the sale of debts secured on the hotels, Claridges, the Berkeley and the Connaught, and the fact that he was not given the chance to buy Mr Quinlan’s shares.

During the second day of the closing submission by Mr McKillen’s barrister, Philip Marshall QC, Mr Justice Richards repeatedly challenged many of the assertions made during the two-month case in the high court by the McKillen side.

He said the decision by the Barclay brothers to sign a one-month exclusivity agreement with Mr Quinlan in January 2011 was “a very dangerous thing for them to do”, making it “impossible” to enforce any oral agreement made with Mr Quinlan months earlier.

He questioned Mr Marshall’s assertions that the Barclays had interfered with Mr McKillen’s rights by trying to buy the £660 million worth of debts secured on the hotels since if all sides were “at it, then it is not unfair”.

The decision to block access to a virtual “data room” holding details of the hotels’ accounts – made at the instigation of a director appointed by the Barclays, Richard Faber – did not affect the outcome since no investors were then interested, he said.

However, Mr Marshall countered, pointing out that Mr Faber had made it clear in his evidence that he and Sir David Barclay had then been seeking to deter “more bidders surfacing for the company”.

The Qatari investors, Al Mirqab, and Crédit Suisse, “whose access to the data room was cut off even though they had signed exclusivity agreements with Mr McKillen and Mr [Kyran] McLaughlin”, were also affected by the closure of the data room.

Meanwhile, Mr Justice Richards questioned complaints from the McKillen side about the decision of some of the Coroin directors not to tell him of the sale by Nama of £660 million worth of debt secured on the hotels, asking what difference it would have made.

Coroin’s abilities to find a new lender at that point, he said, did not “look rosy”. Mr Justice Richards asked why it would not have been in the interest of the company – as distinct from any of its individual shareholders – to find a secure source of funds.

Meanwhile, the National Asset Management Agency, in its closing submission in the case, insisted it had acted properly in selling the £660 million debt to a company owned by the Barclay brothers.

The proceeds from the sale on September 27th, 2011, to Maybourne Finance Limited equalled “the full amount outstanding including all accrued interest” and “was as much as Nama could ever have obtained”.

The sale, which is contested by Mr McKillen, who argues that he was given just 57 minutes’ notice that it was to go ahead, fulfilled Nama’s “statutory function and duties so far as those loans were concerned”.

Nama had made clear to Mr McKillen and others for nine months beforehand that it wanted to get “full repayment as soon as practicable” and that it had given “no guarantee or expectation” that it was prepared to continue rolling over the loans.

“Despite this, during the same period, no progress whatsoever was made by Coroin towards refinancing the loans,” Nama argued.