Court told of €20m share deal before loan transfer

 

The board of Treasury Holdings, when aware that most of the group’s loans would be transferred to Nama, approved the transfer of €20 million in shares to the benefit of Johnny Ronan and Richard Barrett, the High Court heard today.

Nama claims Treasury, founded by is “hopelessly insolvent” with overall debts of €2.7 billion, “past the point of commercial rescue” and an “investment” proposal advanced for it was not actually an investment in the interest of either Nama or the public but would benefit Treasury’s management and shareholders by about €80 million over a period of years, plus an annual “management fee” of €6 million.

Treasury has been funded by Nama, cannot fund itself, and Nama had allowed it use €100 million over the past two years to support its continued functioning rather than pay interest due to Nama on loans acquired, Mary Birmingham, Nama senior portfolio manager, said in an affidavit.

In opposing Treasury’s application for leave to bring a challenge to Nama’s decision to call in loans and appoint receivers over various Treasury properties, Ms Birmingham also said the group’s shareholders were providing no financial support for it and it was unable to repay its debts.

Nama acquired €1.7 billion of Treasury loans in 2010 while the group has additional debts of about €1 billion, she said.

Treasury was founded by  Mr Ronan and Mr Barrett. Both had declined to inject any further shareholder funds into Treasury for some two years and Mr Barrett had said in August 2011 there was no justification for shareholders to inject funds as “no equity existed”.

In an affidavit for Treasury, its group finance director Niall O'Buachalla said he was “at a loss to understand” what had occurred in Treasury’s relationship with Nama to lead to Nama’s decision to appoint receivers.

Nama had constantly changed its requirements of Treasury, including concerning Treasury’s creditors and tax strategy, he said.

In another affidavit, Richard Barrett said, if an injunction was not granted restraining the receivers acting, the Treasury group would suffer loss that could not be compensated for in damages.

Any move to sell assets speedily would be deeply damaging to the wider Treasury portfolio and he was concerned Nama’a actions were threatening Treasury China Trust, with assets in mainland China valued at €1.5 billion.

Mr Barrett also claimed Nama had engaged in no discussions of any real substance with two proposed “bona fide investors” and had given no satisfactory explanation why those proposals had been rejected.

Sections of the affidavits were read today by Michael Cush SC, for Treasury, in the continuing hearing before Ms Justice Mary Finlay Geoghegan of the application by Treasury Holdings and 22 related companies for leave to bring a judicial review challenge and for an injunction restraining the receivers from acting.

Treasury is disputing decisions made last December and January to call in loans and appoint receivers over Treasury’s assets here, including the PricewaterhouseCoopers head office in Spencer Dock and Alto Vetro building on Barrow Street in Dublin.

Nama denies the disputed decisions were made in breach of Treasury’s rights to fair procedures or that Nama acted in “bad faith” concerning the timing of the receivership decision.

The bad faith claim is based on allegations including Nama chose to call in the loans and appoint receivers when, it is claimed, Nama knew Treasury was in active negotiations with “investors”.

In its affidavits, Nama set out assessments carried out by it and others, including PricewaterhouseCoopers, of two separate “investment” proposals advanced by Macquarie Corporate and Asset Finance Ltd and Hines.

Treasury claims Macquarie offered a “generous” purchase price of €622 million for its loan portfolio while another “more complex” bid from Hines offered “a potential total return” to Nama and the Spencer Dock banking syndicate of some €600 million.

Nama claims neither proposal involved actual “investment” in Treasury but rather required Nama to provide significant finance for the acquisition by Macquarie and Hines of the Nama loans.

The proposals, if accepted, would require Nama to finance the loan purchase via deferred consideration for the loans with relatively small upfront cash payments by both Macquarie and Hines, Nama said.

Under both proposals, the proposed consideration was significantly less than the debt owing to Nama and it was concluded neither was in the best interests of Nama or the taxpayer.

In her affidavit, Ms Birmingham said Nama repeatedly asked Treasury to reverse a series of transactions [the TAIL transaction] approved by the Treasury Board when it was aware the Treasury loans were to go to Nama.

The TAIL transaction involved the benefit of the ownership of €20 million shares being transferred out of the group to the benefit of Mr Ronan and Mr Barrett for an unsecured loan note and €100,000, she said.

Treasury contends the TAIL transaction was valid and the shares were sold at market value to Mr Barret and Mr Ronan and paid for via loan note.

At no stage had Nama accepted the propriety of that transaction but Treasury had refused to reverse it and had said again last January it was “a valid transaction”, Ms Birmingham said.

The case continues.