Latest ruling favours McKillen in dispute over London hotels

IRISH BUSINESSMAN Paddy McKillen has won the latest hearing on a preliminary issue in his UK legal battle with the Barclay brothers for control of the five-star Maybourne Hotel Group in London.

The latest ruling strengthens his case against the Barclays to argue that Ireland’s National Asset Management Agency unlawfully transferred €800 million of debt on the hotels to the brothers last September.

The Barclay brothers and Nama, which was drawn into the action by Mr McKillen, had argued that their loan deal meant that they were not required to consult the hotels prior to selling the debt.

Mr McKillen asked the High Court in London to determine whether Coroin, the company behind the group, should have been consulted before Nama’s sale of the debt to Maybourne Finance, which is owned by the brothers.

He also asked for the court to decide whether restrictions within the loan agreement meant the debt could only be sold to a bank, financial institution or other entity which engaged in lending.

Maybourne Finance and Nama had argued that these restrictions did not apply to the transfer of the loans as the debt could transfer under another section of the agreement bypassing these restrictions.

Mr Justice David Richards ruled in favour of Mr McKillen, which allows him to argue in the full trial of the action in March that Nama unlawfully transferred the debt to Maybourne in September 2011.

Mr McKillen was awarded costs of the latest preliminary hearing, which means that the Barclays and Nama will have to pay the costs of the two-day hearing of the issues.

The ruling could also hamper efforts by David and Frederick Barclay to proceed with a rights issue to raise £200 million (€230 million) to refinance the debt their company acquired from Nama.

The Barclays, who control 64 per cent of the group, are pushing for the cash call on shareholders in an attempt to wrest control of the hotels from Mr McKillen, who owns the remaining 36 per cent.

A rights issue would force the businessman to inject £72 million to avoid his stake being diluted.

The Barclays have also sought to acquire debt from Irish Bank Resolution Corporation, formerly Anglo Irish Bank, which is secured on Mr McKillen’s shareholding.

This is the second time that Mr McKillen has been embroiled in a legal battle with Nama. He successfully challenged the State agency in the Supreme Court last year, blocking the transfer of his personal borrowing from Anglo and Bank of Ireland to Nama.

Mr McKillen has argued that he was only given 57 minutes’ notice of the transfer of the debt from Nama to Maybourne Finance.

The Barclays, who own the Daily Telegraphand the Ritz hotel in London, won an earlier preliminary issue in December in the legal action over the Connaught, Claridge's and Berkeley hotels.

The London court found that the brothers’ purchase of a company holding a 25 per cent stake in Coroin did not trigger pre-emption rights in a shareholder agreement which would have given Mr McKillen first refusal on the stake.