A group of Irish investors in a Radisson Blu Hotel in Southern France launched a High Court challenge Tuesday against AIB bank's threat to take over their shares.
Last Month the bank appointed Tom O'Brien of Mazars as receiver to Blagnac Investments Ltd, an Irish-registered investment vehicle that bought the hotel in Toulouse.
The receiver was appointed arising out of Blagnac’s alleged failure to satisfy the bank’s demand for repayment of €27 million which AIB claims is owed to it.
The bank claims it made the demand for repayment after a condition of a mortgage agreement it entered into in respect of the hotel in 2008 was not complied with.
Blagnac disputes the bank’s claim and challenges the validity of AIB’s demand and its appointment of a receiver. It says the appointment could have catastrophic consequence for the operation of the hotel and Blagnac’s shareholders.
The legal challenge by the Irish group was partly heard but was adjourned until Thursday because of a technicality.
The High Court heard it was feared AIB’s action could result in Blagnac having to pay the Radisson group a €3 million penalty due to the early termination of a management agreement Blagnac has with the hotel group. Blagnac also claimed the appointment risks destabilising the hotel’s management team and puts key contracts in jeopardy.
Arising out of the appointment, Blagnac and one of its directors and shareholders Tom Kingston, are seeking a declaration that Mr O'Brien's appointment on July 17th is invalid and has no legal effect.
Mr Kingston and Blagnac also seek an order restraining the receiver from taking any steps on foot of his powers as a receiver pending the outcome of the full hearing of the case.
The High Court earlier granted Blagnac Investments Ltd, represented by Louis McEntagart SC,leave to serve short notice of the application for various orders against Mr O’Brien and the bank.
Lydon MacCann SC, for Mr O'Brien and the bank, told Ms Justice Carmel Stewart his clients were opposing Blagnac's application.
In a sworn statement Mr Kingston, of Corran, Waterfall, Near Cork, said Blagnac Investments Ltd is an Irish registered holding company, whose shareholders comprise various individuals and self-administered pension funds.
The company holds all the share capital in Luxembourg-registered Blagnac Investments SARL, which in turn owns French-registered 2 Rue Dieudonne Costes (SAS).
The French company is the legal owner of the Radisson Blu Hotel in Toulouse. In 2006, AIB loaned the French company €31.7 million to refinance loans owed to KBC bank relating to the construction of the hotel. In September 2008, the parties entered into guarantees and indemnity agreements in respect of the loan, which were amended last year.
Earlier this year, Mr Kingston said the hotel, which had been trading profitably but was suffering due to the debt burden, entered into a special mediation process supervised by the French courts.
The purpose of that process was that creditors could arrive at a consensual restructuring of the company’s debts. While the bank participated in the process, it rejected a proposal from a French official who suggested that to put the business on a long-term sustainable footing, the shareholders inject additional funds into the hotel.
