McKillen challenge to IBRC to be heard before loan sale finalised

The legal challenge by property investor Paddy McKillen aimed at preventing Irish Bank Resolution Corporation selling €246 million of his loans to the billionaire Barclay brothers will be heard next March if the Barclays win the bidding war for the loans.

The High Court heard today that noon tomorrow is the deadline for any initial bids for the loans of the Belfast businessman to be lodged with the special liquidators of IBRC.

A final decision on the winning bid is expected to be made next March but, if the Barclays are the selected bidder, Mr McKillen’s challenge will be heard before any sale is finally effected.

If Mr McKillen wins his case, the liquidators have said they will abide by the court’s decision. Subject to the Barclays winning the bid, the case will open on March 4th and is listed for six days.

In his proceedings, Mr McKillen wants orders requiring the loans be bought on the basis of their existing terms and conditions and not be sold to the Barclays.

Cian Ferriter SC, for the liquidators, said the stage two bidding process for the loans will begin next month and his clients are anxious the litigation should not impact on the loans sale process.

The liquidators are effectively caught in “the crossfire” in the bitter battle between Mr McKillen and the Barclays and appeared to have been joined to the case purely to ensure any orders granted to Mr McKillen could be put into effect, counsel added.

Earlier, Michael Cush SC, for Mr McKillen, proposed his client’s application for injunctions could be “telescoped” into an early full hearing next March, with the effect the court would not have to decide the injunctions issue now.

Mr Cush also said, because there would be an early full hearing, he was not now seeking to join the State to the case for the purposes of challenging provisions of the IBRC Act which make it difficult to get injunctions against the bank.

Counsel’s proposal was agreed to by the sides.

The Irish proceedings come after Mr McKillen last month lost the final stage of his Stg£20 million UK court battle against the Barclays for control of three luxury hotels in London - Claridge’s, the Connaught and the Berkeley.

Mr Justice Gilligan earlier this week granted an ex parte application by Mr Cush for leave to bring proceedings against IBRC concerning the proposed loans sale.

The purpose of the action was not to stop the sale of the €246 million personal loans tranche but rather to ensure whoever took on those loans did so on the basis of the renegotiated terms and conditions related to those loans, counsel said.

In an affidavit, Mr McKillen said it was necessary to bring the action “to protect my commercial interests and my constitutional rights relating to property”.

A good faith provision in the shareholders agreement of the London hotels' holding company - Coroin Ltd - means he is entitled to stop the IBRC liquidators accepting an offer from the Barclays, he said.

He is seeking orders preventing IBRC treating the personal loans tranche as anything other than loans of a fixed three year period from December 2012.

Mr McKillen said he had been a customer of IBRC, formerly Anglo Irish Bank, for over twenty years and has numerous performing loans including for €241 million relating to his interest in the Jervis St car park, Dublin; €308 million relating to his interest in properties in Doncaster, UK; and €246 million personal loans secured by a charge on certain assets including shares in Coroin Ltd.

After the banking crisis, he sought to protect the position of himself and his businesses by ensuring the Doncaster, Jervis Street and personal loans could not be called in, leaving him without credit facilities, he said.

He engaged with the bank about extending all of his loans, including the personal loans, by three years “so that my business could withstand the turbulent economic and banking climate”.

The bank was very anxious to retain him as a customer and strongly resisted attempts by NAMA to acquire his loans, he said.

However, a complex “jumbo” refinancing proposal of 2012 had not been effected. That involved his offering an hotel and farm in Argentina, plus a personal guarantee and a pledge not to reduce his worldwide non-IBRC charged assets below €50 million, as additional security, he said.