NIB seeks €6.3m judgment orders against financier

NATIONAL IRISH Bank has asked the Commercial Court to grant €6.3 million judgment orders against financier Niall McFadden arising from his personal guarantee over loans to a company to acquire the Buy & Sell classified ads business.

Mr McFadden’s involvement in the move to acquire Buy & Sell was “a pivotal factor” in arranging the finance as he was seen as a “deal-maker” with a reputation which went before him, James Doherty, for NIB, said.

Mr McFadden also had a considerable personal fortune which he was prepared to put “on the line” in the form of an undertaking not to reduce his personal assets below €20 million, counsel said. This personal wealth and Mr McFadden’s experience in the market provided “a lot of security” for the bank in providing the finance.

The bank rejected Mr McFadden’s claim his personal guarantee over the bridging loan sum was not enforceable because the bank had extended that facility without his written consent, Mr Doherty said.

These extensions did not amount to a variation of the agreement between the bank and Mr McFadden and, as Mr McFadden had participated and acquiesced in what was done, he in any event could not rely on those extensions to discharge his guarantee.

Counsel was opening the bank’s action before Mr Justice Frank Clarke, listed to last two days. Mr McFadden was in court yesterday.

In his defence, Mr McFadden contends the bridging loan facility to which his guarantee related was for a three-month period and could only be extended with his written agreement.

It had in fact been extended for some 27 months during which time the economic position of Naldin Ltd, the company which secured the bridging loan facility, worsened, he said.

The case arises after Mr McFadden put together a deal in 2007 to purchase Buy & Sell. Naldin Ltd was incorporated to purchase the business from Associated Newspapers for €21.3 million in a deal funded by NIB. After Naldin was unable to raise equity finance, the business ran into difficulties.

An examinership failed, a receiver was appointed by NIB and the Buy & Sell business was sold for some €1.9 million last year.

NIB had advanced more than €18 million to Naldin, secured on charges over the entire assets and undertaking of Naldin, BS Ltd and Buy & Sell Northern Ireland Ltd.

National Irish Bank demanded payment of some €18.8 million last September but no payment was made.

NIB said, while the assets of the Buy & Sell group would not meet the bank’s security for the loans provided, it had taken some comfort from Mr McFadden’s guarantee, especially where he also undertook, as long as he remained under any obligation to NIB, to maintain unencumbered assets of some €20 million.

Mr McFadden, St James Street, London, has claimed NIB’s own actions have made its debt less likely to be recovered.

He had proposed to purchase the company out of examinership – his was the best offer – but NIB would not negotiate with him and would now receive just €1.5 million from the receivership, he claimed.

The case continues.