Anglo resists Nama loan bid

 

State-owned Anglo Irish Bank challenged the National Asset Management Agency (Nama) on its plans to buy the loans of developer Paddy McKillen and took issue with “factual errors” made by the Government agency in a letter to his solicitors last month.

Anglo objected to the transfer of €800 million in loans owing by Mr McKillen and his companies to Nama, arguing that his loans were not on a list of top 100 land and development loans submitted to the agency last year.

The bank has appealed successfully against the transfer of loans belonging to other borrowers.

The objections are detailed in a letter filed in court as part of a legal challenge by Mr McKillen against Nama – the first against the constitutionality of the legislation establishing the agency.

His move to stop the transfer of his loans was given a fast-tracked date for hearing in the Commercial Court yesterday. The court fixed the hearing, which is expected to last four days, for October 12th.

The State told the court that Mr McKillen’s action posed “a very real threat to the vital work of Nama” to increase and maintain confidence in the banking sector.

The case came before the court as Nama said it had completed the transfer of the second tranche of loans from four of the five participating institutions – Allied Irish Banks, Bank of Ireland, Irish Nationwide Building Society and EBS building Society.

Some €5.2 billion in loans linked to the 23 borrowers below the 10 biggest were acquired for €2.7 billion at an average discount of 48 per cent. This compares with 50 per cent in the first tranche.Nama has yet to buy an estimated €8 billion in loans from Anglo in the second tranche.

The individual discounts applied to the four lenders are higher than in the first tranche, with Irish Nationwide’s discount rising to 72 per cent.

The action by Mr McKillen and 15 of his companies relates to €80 million in loans earmarked for transfer from Bank of Ireland.

They claim the loans are “fully performing” and their transfer would have a “drastic and significantly detrimental effect” on their business and property rights.

They dispute the loans are “eligible bank assets” under the Nama legislation. Mr McKillen has expressed “grave concern” about the impact on his reputation of loan transfers to the “toxic bank”.

Nama wrote to Mr McKillen’s solicitors Eugene F Collins on June 4th, saying Anglo had told the agency that his loans were eligible for transfer to Nama and that neither the bank nor the agency objected to the purchase of any of his loans on grounds of eligibility.

Mike Aynsley, chief executive of Anglo, told Nama in a letter dated June 11th – seen by The Irish Times – that the bank took issue with “factual errors” made in the agency’s statement.

Anglo believed Mr McKillen’s loans should not go to Nama, that the bank was told by Nama to provide details of the loans and that the bank unsuccessfully objected to the transfer in December 2009 and February 2010, he said.

The court was told that the transfer of Mr McKillen’s Anglo loans was now subject to a review.

Mr Aynsley said that Mr McKillen “seems not to have received an explanation from Nama as to why Nama considers his loans to be suitable/ eligible and if he has then he clearly does not understand why”.

Anglo had difficulty explaining the reasons for this, as “the only explanation we have received from Nama is that the McKillen loans are systemically important”.

The bank said Mr McKillen had land and development loans of about €5 million in California and Budapest “against the connection exposure totalling approximately €800 million”. “We are not aware however of any other reasons that would determine them as systemically important,” he said in the letter.