Nama sues Treasury Holdings


Treasury Holdings and its owners Richard Barrett and John Ronan are being sued by the National Asset Management Agency in a bid to reverse a controversial transaction where €20 million shares were allegedly transferred out of the group to the benefit of Mr Barrett and Mr Ronan for €100,000 and unsecured loan notes.

Nama, which acquired €1 billion of Treasury’s €2.7 billion loans in April and May 2011 after the disputed Tail transaction of March 22nd 2010, claims there was no commercially valid reason for that transaction made when Treasury was either insolvent or in very difficult financial circumstances.

The transaction was for “a significant undervalue”, impaired the rights and interests of Nama as the major creditor of Treasury and was made with the intention of defrauding bank and/or other creditors of Treasury, it alleges.

In entering into the transaction, Mr Barrett and Mr Ronan failed to act in the best interests of Treasury and/or its creditors, breached their fiduciary duty to the company and creditors and breached the Nama Act, it is claimed.

In an affidavit, John Bruder, managing director of Treasury, said the Tail transaction was not illegal and there was a valid commercial reason for it. He also argued Nama’s handling of Treasury’s efforts to sell the group’s Nama loans had damaged efforts to reach agreement on the Tail issue.

The proceedings were transfereed to the Commercial Court today by Mr Justice Peter Kelly on the application of Paul Sreenan SC, for Nama.

Michael Collins SC, for Treasury, said it was neutral on transfer but believed the proceedings were premature and the Tail issue was best addressed by mediation. His clients had never accepted there was anything wrong or improper with the Tail transaction, he said.

Mr Sreenan indicated there was no point to mediation as Nama was not prepared to accept less than reversal of the Tail transaction.

The judge said he would not direct the parties to consider mediation in those circumstances. While Treasury had also argued the Nama case was premature as Treasury’s judicial review challenge to the manner in which Nama called in its loans had yet to be heard, the judge noted the Treasury case related to the procedures adopted by Nama and, even if Treasury won, it could not stop this case. He approved a schedule for exchange of legal documents and returned the matter for mention in October.

The case relates to the March 22nd 2010 Tail transaction where some €20 million shares in China Real Estate Opportunities (CREO) were transferred by three Treasury subsidiaries into another wholly owner Treasury subsidiary - Daylasian - for unsecured ten year loan notes with a face value of some €18.4 million.

Nama claims the economic effect of that transaction alone on Treasury was neutral as the loan note instrument represented an inter-company debt and the CREO shares remained beneficially owned by Treasury.

However, Nama claims, on the same date, the defendants caused Treasury to transfer its interest in Daylasian to Mr Barrett and Mr Ronan for €100,000 leaving Treasury with an unsecured loan note instrument from what was no longer a group company.

On that date, the market value of the CREO shares greatly exceeded the €100,000 sum plus the market value of the unsecured loan mnotes issued by Daylasian to the Treasury subsidiaries involved, Nama claims.

Daylasian changed its name to Treasury Asian Investments Ltd (Tail) on April 22nd 2010 and four days later CREO announced confirmation of a conditional “eligibility to list” application to list a business trust (Treasury China Trust) on the Signapore Stock Exchange via a swap of CREO shares for TCT units, NAMA said.

After CREO was delisted from the London Stock Exchange and relisted on the Signapore Exchange as TCT, Tail held 26 million TCT units and a financial statement for Tail for the year ended February 2011 disclosed the market value of the shares in CREO in April 2010 as €28.3 million, NAMA said.

In his affidavit, Mr Bruder said the rationale for the transaction arose from a decision by the CREO plc board to relist the company on the Signapore Stock Exchange as a business trust.

The Asian arm of US investment bank JP Morgan had advised the Signapor exchange would be concerned the sizeable shareholding of Treasury in Treasury China Trust, as the new entity was to be named, could destabilise the market in TCT shares if it had to be disposed of precipitously. JP Morgan recommended ownership of the CREO shares be transferred to avoid the market being impacted in the event of a forced sale by Treaury.

Disputing NAMA’s claim the value of the loan notes was very sigfnicantly less than the then value of the CREO/TCT shares, Mr Bruder said TAIL paid significantly more than market value for the shares acquired. Nama appeared to ignore the loan notes received by Treasury were an asset of Treasury held in the expectation they would be paid in full, he added.

NAMA previously accepted a Treasury-proposed solution to the Tail issue but that was not put in place when a deal with US-based private equity firm CIM for acquisition of NAMA’s Treaury Loan portfolio did not proceed, he said. Treasury believed the CIM deal unravelled because of “very belated” raising of the Tail matter by Nama.