Claims Catherine Murphy made in the Dáil about Denis O’Brien’s borrowing with IBRC follow concerns she first raised in the house four weeks ago.
It is as well to state first that her claims have been rejected by O’Brien, his spokesman, James Morrissey, former IBRC chief Mike Aynsley and former IBRC chairman Alan Dukes. Reporting remains subject to heavy legal constraint, thus key information remains obscured.
This affair flows from disquiet over IBRC’s sale to an O’Brien-owned company in March 2012 of Siteserv. Controversy was slow to gather pace but it did eventually, largely following Murphy’s scrutiny of the case. Political pressure led Minister for Finance Michael Noonan to seek a formal review of IBRC sales, including Siteserv, from KPMG partners Kieran Wallace and Eamonn Richardson. They have been special liquidators of IBRC since the Government moved in 2013 to close the bank. Critics, including Murphy, cried foul because KPMG was a financial adviser to Siteserv when it was sold to O’Brien.
In the Dáil on May 6th, Murphy said Siteserv’s buyer was one of IBRC’s largest debtors. This implicit reference to O’Brien was where the imbroglio began. “His loans had expired and he had apparently written to Kieran Wallace in his role as special liquidator seeking the same terms IBRC had allowed him, which was to pay off his loans in his own time at low interest rates,” she said.
“When a loan expires, one expects a penalty to be put onto it, not a discount. My understanding is that it was costing IBRC 7 per cent for its money, significantly higher than the 1 per cent Nama was borrowing at.” The acting chairman of the Dáil sitting, Labour TD Jack Wall, urged Murphy not to name anyone. But she did: “Even if Denis O’Brien’s loans were eventually paid off in full . . . the interest rate represented a subsidy.”
The proposed RTÉ report that prompted O’Brien to seek a High Court injunction is partially based on the correspondence Murphy referred to between O’Brien and Wallace. High Court restrictions remain in place. But it can be said that O’Brien sent the letter in October 2013, eight months after the liquidators took command of IBRC.
In court last month, O’Brien’s counsel Michael Cush said the letter revealed “precise information regarding his historical debts, the repayments he had made, and the balance” due. The letter referred to the repayment period on the debt, Wallace’s stance on that, and it concluded with a “request” from O’Brien.
Implication
Murphy’s first observation in the Dáil was that O’Brien was seeking to prolong favourable terms. By saying the interest rate represented a “subsidy”, the implication was that the borrowing cost was lower than elsewhere. Murphy said the original term had expired but a discount was sought instead of a penalty applied.
In the Dáil last Thursday, Murphy went further by saying Aynsley made “verbal agreements” with O’Brien “to allow him to extend the terms of his already-expired loans”. She claimed such agreements were never brought to IBRC’s credit committee for approval. She wanted clarification in respect of interest but understood O’Brien was “enjoying a rate of around 1.25 per cent when IBRC could, and arguably should, have been charging 7.5 per cent”.
The loans were large. “Given that we are talking about outstanding sums of upwards of €500 million, the interest rate applied is not an insignificant issue for the public interest,” Murphy said.
Such claims remain to be tested. She implied O’Brien would pay annual interest of €6.25 million on a €500 million loan (1.25 per cent) instead of €37.5 million (7.5 per cent). Annual benefit: more than €30 million. “We also know that Denis O’Brien felt confident enough in his dealings with IBRC that he could write to Kieran Wallace . . . to demand that the same favourable terms extended to him by way of a verbal agreement could be continued,” she said.
The thrust of all this has been rejected by O’Brien, Morrissey, Aynsley and Dukes. The essence of O’Brien’s claims, which also have yet to be tested, are that Murphy is drawing from stolen files and that they have been tampered with in some way so as to reflect an “erroneous and untruthful” state of affairs. He says he always paid a “full margin” on borrowings from the bank.
Equal treatment
In discussing the bank’s approach to clients generally, Aynsley said all performing IBRC clients were treated exactly the same. But he has acknowledged that different interest rates applied in line with loan category and risk.
IBRC’s objective was to recover through repayment as much of the “loan balance” as possible, he said. “It was not possible for either the CEO or any other member of management to make a commitment to any client, such as that alleged by Ms Murphy, without the prior formal approval of the credit committee. For clients with exposures above a certain threshold, additional board approval was required.”
For larger IBRC clients a direction or strategy was “agreed/approved” by the credit committee. The committee first approved a phase-one pay-down schedule for a significant portion of the loans. Second, it agreed with the client that the bank would enter into negotiations for scheduled repayment of the remainder when the phase-one target was achieved.
Aynsley said the second phase was an “agreed or approved direction or strategy” but this was not an “approved commitment” by IBRC.
“Providing the client complied with the phase-one targets and no deterioration in the client’s affairs had taken place over the period, then it would have been expected that the phase-two negotiation would have taken place automatically and proceeded back to the credit committee for a commitment approval, followed by board as well if threshold levels required its approval.”
The implication was that later payments mirrored phase one so long as clients, such as O’Brien, maintained payments. Still, control of IBRC moved to liquidators in 2013.
