McKillen feared loans would be called in

BUSINESSMAN Paddy McKillen feared that the Barclay brothers would create a “pre-pack administration” for the Maybourne hotels and call in the group’s loans after they bought the €800 million in debt from the National Asset Management Agency.

Mr McKillen was giving evidence for the third day in his legal action in the High Court in London against billionaire twin brothers Frederick and David Barclay, over control of the £1 billion company that owns Claridge’s, the Berkeley and the Connaught.

A 36 per cent shareholder in the hotels, Mr McKillen claimed that his situation had changed dramatically after the brothers, who control the remaining 64 per cent, bought the debt through Maybourne Finance Limited (MFL) in September 2011.

Asked by Mr Justice David Richards whether he had evidence the Barclays were planning a “pre-pack administration”, Mr McKillen said his legal advisers had suggested that they could “exert pressure on me and push me out of the business”.

“The evidence was that there was a conspiracy between Nama, Barclays Bank [the brothers’ lender] and Barclay brothers to buy this debt without us knowing about it, without the company knowing about it, without me knowing about it,” Mr McKillen said.

“There was certainly enough information there to give us grave concern as to what their motives were.”

Joe Smouha QC, for the directors appointed by the Barclay brothers, said this could aptly be described as a “conspiracy theory”.

The preference of the brothers was for a refinancing of the business potentially through a rights issue cash call on shareholders once the possibility of refinancing the group’s debts had been explored, the court was told.

The court also heard that Mr McKillen wrote to Nama on August 26th, 2011, to find out if the State loans agency was involved in negotiations with any third parties about the sale of the debt after it had rejected a proposal to refinance part of the debt.

Mr McKillen told Nama in his letter that under the existing loan agreement, in the event of Nama selling the debt, it was obliged to consult the company before doing so. Nama’s then head of portfolio management John Mulcahy said Name was “aware of its obligations under the loan agreement”, which Mr Smouha said was a “nice way of saying ‘it is none of your business’.”

Mr McKillen said there was “no harm in trying” to find out this information, even though he knew he was not entitled to be told if Nama was in discussions to sell the debt.

The court was also told that the Barclays blocked crucial redevelopment work on two iconic London hotels in a bid to frustrate Mr McKillen to prove he no longer had operational control.

He claimed the businessmen, who own the Daily Telegraph newspaper, instructed their agent to “deliberately block crucial redevelopment work crucial to maintaining Claridge’s competitive edge” to prove a personal point against him.