AIB steals a march over O’Reilly’s other banks

What does the judgment mean in practical terms?

When he asked for a six-month stay on executing €45 million of judgments by AIB, Sir Anthony O'Reilly said he feared it would cause "great anxiety" to the seven other institutions to which he owes cash.

Sir Anthony owes about €195 million in total. His subtext was clear: if AIB broke ranks and secured a judgment, the other banks, with whom he has forbearance arrangements, could panic and pile in on him to secure their place in the queue.

So what does yesterday’s judgment mean for the former billionaire? And are the other banks likely to lose patience with him following AIB’s victory?

According to Liam Dowdall, the head of restructuring at Smith & Williamson, in situations like this it depends upon their level of security over the assets.

Sit tight

“Where they have security, they may just sit tight. It could worsen the situation to start appointing receivers. But as for unencumbered assets (those against which they have no security), they may opt to seek similar judgments,” he said. That could take them six weeks.

AIB's summary judgment means it can go ahead and get judgment mortgages against Sir Anthony's unencumbered assets and not just those over which it holds security. It has stolen a march on the other banks. Mr Justice Peter Kelly said in court yesterday it is unlikely the security given to AIB will cover what he owes.

The bank has a claim over a third of the lands at Castlemartin, Sir Anthony’s 750-acre Kildare estate. It also has a claim over two lodges on its grounds; his Cork holiday home, which is about to be sold for €1.75 million; and €1.4 million worth of shares in independent News and Media.

Regardless of what happened in court yesterday, AIB was and remains entitled to appoint receivers over those assets at any time. To date, it has held off. But for how long?

The other banks to which Sir Anthony owes cash include Bank of Ireland, Ulster Bank, ACC, Mellon, Lloyds TSB, EFG Bank & Trust (Bahamas) and Lone Star. ACC has a mortgage over the mansion house at Castlemartin, which is up for sale. It is unclear what level of security the other banks have.

Unencumbered assets

Sir Anthony said his unencumbered assets include 50 per cent of Fitzwilton, which owns the Rennicks signage company, house contents worth up to €1 million, a cottage near Castlemartin and two €1 million pensions.

This implies his luxury home in the Bahamas is already pledged, while the status of his art collection, once estimated at €150 million, is unclear. About €3.2 million from the upcoming sale of his house on Fitzwilliam Square is earmarked for ACC.

Sir Anthony’s stake in Providence Resources, also apparently pledged, is worth €17.4 million. A year ago it was worth three times that.

Key, now, for the former billionaire is the fate of Castlemartin, two-thirds of which appears to be unencumbered. He will need AIB’s co-operation to effect its sale.