PROPERTY DEVELOPER Paddy McKillen’s attempt to win control over three luxury London hotels has been dealt a severe blow, following a long-awaited judgment in favour of the National Asset Management Agency (Nama) by the court of appeal in London.
The three judges ruled Nama’s decision to sell €660 million worth of debt held on the hotels – the Berkeley, the Connaught and Claridges – to major shareholders Sir Frederick and Sir David Barclay was lawful.
The Belfast-born Mr McKillen has been refused leave to challenge yesterday’s judgment to the British supreme court, though his spokesman emphasised the ruling did not rule on the charges of unfair prejudice and conspiracy against the Barclays, which remain to be decided.
However, it does mean the Barclays could try to reduce his shareholding in the hotels’ holding company, Coroin, by seeking to have some of the debts repaid, even if the result in the main case goes in Mr McKillen’s favour.
The €660 million debt was lent by Anglo Irish Bank and Bank of Ireland to a consortium including Mr McKillen, led by financier Derek Quinlan in 2004 when they bought the hotels, along with the Savoy in 2004. In September 2011, the debt was sold by Nama, which was unhappy with the length of time it was taking Coroin to find an alternative lender, to Maybourne Finance Ltd, a Barclays-controlled company.
Last year Mr Justice David Richards ruled in the High Court that the debt sale had to fall because of the lack of consultation and notification given by Nama to Coroin of its decision to sell, but he gave leave then for an appeal.
Under the terms of a facility agreement, the new lender, Maybourne Finance, should also have had to pledge in writing to honour the same obligations as the original lenders before the transfer of the debt was concluded.
The decision is a major victory for Nama, particularly since the judges accepted its founding legislation requires it to get the best possible return “as soon as practicable” in order to reduce its holdings “to zero as soon as commercially practicable”.
Nama had “to be able to acquire such loans, and dispose of such loans, as easily as possible”, said the master of the rolls, Lord Justice Toulson, adding that “the plain purpose” of its founding legislation is “to remove impediments on disposals”.
Rejecting Mr Justice Richards’s questioning of the drafting of the Nama legislation, Lord Justice Toulson said the differences between certain sections are “easily explicable by the haste” with which it had to “be composed, coupled with the inevitable complexity” of drafting.
It “would be very odd” if Nama’s powers gave it the right to override the need for a debtor’s consent, without also not overriding “the much weaker and less valuable requirement of that person having to be consulted”.
If that were the case, “it would mean that Nama had thereby voluntarily accepted an impediment” in the loan agreement to its powers to sell, or transfer debt “inconsistent with its statutory rights”. Such an acceptance by Nama “would have been perfectly proper, but, at least on the face of it, inherently unlikely”, said Lord Justice Toulson, who gave his judgment along with Lord Justice Lewison.
