Nama to ask developer why it should not take over €2bn of his bank loans

ANALYSIS:Court rules that Nama has to give Paddy McKillen a fair hearing over his loans

STATE AGENCY Nama is likely to ask developer Paddy McKillen to explain why the agency should not take over €2 billion worth of his bank loans within the next few weeks.

McKillen challenged the legislation underpinning Nama and its right to buy his loans from the participating Irish banks in court last year. In February, the Supreme Court ruled that Nama did not make a lawful decision when it attempted to take over his loans in late 2009, although it held off at the time on dealing with the law’s constitutionality.

Yesterday the seven-judge court ruled the legislation establishing Nama in the first place was constitutional, but said the agency had to give McKillen a fair hearing if he wanted to outline why it did not have the right to take over his loans.

Nama chairman Frank Daly welcomed the court’s ruling in a statement issued yesterday.

“We will study the decision carefully with our legal advisers, and we note the finding of the court that Mr McKillen and his companies have the right to make representations to Nama before the agency makes a decision to acquire the bank loans.”

McKillen also welcomed the ruling, and said he had been vindicated by the judges’ unanimous ruling that he had a right to fair procedures.

“Our business is robust with quality assets. All of our loans are fully performing and being repaid, and our properties are over 95 per cent occupied with blue-chip tenants.”

It is likely Nama will ask McKillen to make his representations to the agency, and will only decide what steps it will take once it has heard and considered his submission.

Mr Justice Adrian Hardiman’s judgment criticises Nama’s original response to Mr McKillen’s inquiries when it decided to take control of his loans. The judge said the agency never gave him a direct response when he asked it if it had decided to buy the loans. “I can only characterise this correspondence of Nama’s as exhibiting evasiveness,” Mr Justice Hardiman said.

His ruling stated that as McKillen’s rights could be affected in some way by Nama’s actions, he had a right to be heard. His ruling added that any legal exceptions to that right do not apply in this case.

McKillen, who owns shopping centres, office blocks and investment properties in Ireland and overseas, began his legal action against the State agency last year.

Nama wants to acquire €2.1 billion worth of property loans given to him by Irish banks to finance his activities here.

McKillen maintains that his loans are performing – that his businesses are meeting all their repayments.

Along with Derek Quinlan and Kyran McLaughlin of stockbroking firm Davy, he is a shareholder in Maybourne Hotels, which owns a number of high-profile London properties, including Claridge’s and the Berkeley.

McKillen borrowed about €650 million to fund his investment in Maybourne, but recently refinanced that debt, putting it outside Nama’s remit. The agency does own Quinlan’s Maybourne debts.