Cantillon: The high cost of playing hardball

Galway-based Rhatigan group is the latest property company to find itself at odds with the new owners of its loans.

In a move that has echoes of Michael O'Flynn's battles with Blackstone, Pádraic Rhatigan has gone to court to stop Goldman Sachs taking control of some of his assets on foot of loans it bought from Ulster Bank.

As was the case with O’Flynn, Rhatigan believes it can refinance the loans in question with a third party and is seeking to stop Goldman’s Beltany Property Finance from appointing a receiver to the underlying assets.

Both the Rhatigan and O’Flynn sagas raise an interesting question. Why, if the debtors have been shown to be capable of refinancing the loans, did the original lenders sell them? This is particularly so in the case of Mr O’Flynn, whose debts were sold by Nama,which on many occasions – less so recently – vowed to get back every penny possible for the taxpayer.

It would appear that the likes of Blackstone and Goldman are better at playing hardball with property developers than Nama and, as a result, were able to squeeze more out of Irish property developers.

It is of course not quite that simple. Both Blackstone and now Goldman Sachs have found themselves in the High Court, which is never cheap nor predictable. It might make commercial sense for them to go to court on foot of a single debtor, but if Nama had taken a similar approach it would potentially have ended up with multiple court cases on its hands.

It is possible that Nama would have got more money back if it had moved against more developers. But that has to be balanced against the potential costs including pouring cold water on what turned out to be a very welcome and very healthy recovery in Irish commercial property assets.