The National Assets Management Agency (Nama) and the State will ask the Commercial Court next Monday to fast-track the first legal challenge to the agency by businessman Paddy McKillen and 14 of his companies over the proposed transfer of Nama of €80 million loans of the companies.
Mr McKillen claims the €80 million credit facilities from Bank of Ireland are "fully performing", not impaired, there is no default on repayments, and transfer of the loans would have a "drastic and significantly detrimental" impact on his business and property rights.
He has also expressed "grave concern" about the impact internationally of transfer of the loans to the "toxic bank", the implications for his companies abilities to raise additional facilities and the valuations placed on the loans by Nama.
For instance, Nama had obtained a Stg£725.9 million valuation from CBRE for assets on which a loan for the UK Maybourne Hotel Group was secured when he had last month obtained a valuation of Stg 994.78 million from Cushman & Wakefield Hospitality
Ltd, he said. He was concerned such valuations would drive down the realisable value of his companies property portfolio.
Mr McKillen said his companies had not purchased any Irish assets since 1998 "and hence have not engaged in speculative development". His companies instead invested in "world class retail centres and other quality assets".
Concern that his loans would end up in Nama had already led to a reluctance by banks to fund a Captain America’s and Wagamama food chain outlets which he intended to open in Blanchardstown shopping centre, creating 100 jobs, Mr McKillen said. He was also very critical of the manner in which Nama had dealt with the issue of the proposed transfer.
The 14 companies and Mr McKillen are challenging the proposed transfer to Nama of credit facilities of some €80 million advanced by Bank of Ireland alone, Paul Coughlan, for Nama and the State, told Mr Justice Peter Kelly yesterday. The case was "of very considerable urgency given the subject matter".
Mr Justice Kelly granted Mr Coughlan leave to bring a motion at short notice on Monday to transfer the proceedings by Mr McKillen to the Commercial Court, the division of the High Court which fast-tracks business disputes.
The judge heard Mr McKillen had on July 1st sought short service of a motion for leave to bring judicial review proceedings in the High Court but that was adjourned on consent for two weeks. Mr Coughlan said his side wants the leave application heard with the substantial judicial review in a "telescoped" hearing.
John Gleeson SC, for Mr McKillen, said they would not oppose the application to transfer the case to the Commercial Court on Monday.
The proceedings are by Dellway Investments, 13 other companies and Mr McKillen against Nama and the State. Mr McKillen has either a 50 per cent or 10 beneficial interest in all of the companies.
The companies also have loans with Anglo Irish Bank and Irish Nationwide Building Society, but the action relates to the B of I facilities. Mr McKillen says he is reserving his rights relating to the other facilities.
In an affidavit, Mr McKillen said he believed, although the loans at issue are not impaired, various properties have been valued significantly lower than their market value. An investment property owned by him at Place Vendome in Paris was valued by Nama at €25.6 million when he had last month obtained a valuation of €35 million to €40 million for it, he said.
Other properties at Old Bond Street, London, were valued by Nama in November 2009 at €14.7 million when he had entered into a contract in May last for sale of that property for €18.2 million. Nama had told Bank of Ireland its approval was required for that sale and such conditions were contrary to his interest, he said.
Other properties at Wilton Place, Knightsbridge, London, adjacent to an hotel in the Maybourne Hotel Group, was valued by Nama at €19 million when Jones Lang LaSalle Hotels placed a €37.5 million valuation on those for refinancing purposes, the court was told.
Given the likely time span of Nama, he also anticipated it would take a shorter term view than a bank and seek to maximise its returns by selling off loans to others or by calling in loans and realising security. This would have "a devastating effect" on his companies and himself as personal guarantor of loans to the companies.
He was concerned about the possible impact on his reputation of transfer to Nama when it was regarded by international financial institutions as a bad or toxic bank set up by the State to deal with distressed loans against properties which had failed.
The borrowers of those loans "are perceived, perhaps wrongly" as having engaged in reckless conduct over the past ten years in Ireland requiring State assistance to bail them out from poor business decisions, he said. His companies loans were "simply not in this category" but were advanced for and secured against “well let fully functioning commercial offices, retail shopping centres and hotels”.
Mr McKillen wants declarations the procedures and processes adopted by Nama are lacking in natural and constitutional justice and deny his companies the opportunity to argue their loans are not in fact "eligible bank assets" within the meaning of the Nama Act 2009.
It is claimed Nama has denied the applicants reasonable opportunity to refinance their borrowings so as to ensure their credit facilities do not represent eligible bank assets and has also denied them the chance to make representations as to the value at which their credit facilities are transferred.
The proposed transfer breaches their property rights under the Constitution and European Convention on Human Rights, it is claimed.
Unknown to them, the companies claim Anglo had in November 2009, in response to a request from Nama, provided information to it about their credit facilities with Anglo. Anglo objected to Nama acquiring those loans and that matter was now subject of an expert review procedure but the companies were not allowed participate in that, it is claimed.
The companies say they separately learned Nama had made a similar request to Bank of Ireland relating to their loans with it. In May last, they first became aware Nama proposed to acquire their credit facilities from Anglo and B of I.
