THE NATIONAL Asset Management Agency (Nama) is seeking to bring €2 billion in loans connected to businessman Paddy McKillen into the agency as a result of a £35 million loan drawn to buy a property next to his five-star Berkeley hotel in Knightsbridge, London. A legal challenge by Mr McKillen and 15 of his firms against the transfer of bank loans to Nama starts today in the High Court.

The case is being heard by a special three-judge division of the court. It had been scheduled to run for four days but could last for up to 10 days.

The case will be heard by the president of the High Court, Mr Justice Nicholas Kearns, who will be sitting with Mr Justice Peter Kelly and Mr Justice Frank Clarke.

Mr McKillen has claimed that the transfer of his loans to Nama will damage his businesses and property rights, and have a detrimental effect on the value of his properties.

He claims his loans are fully performing and that he is meeting interest payments in full.

Mr McKillen and his businesses are understood to have an annual interest bill of €89 million a year on various bank loans and surplus yearly income of €60 million over and above this sum.

The State loans agency is acquiring €73 billion in land and development loans and related loans affecting about 1,400 borrowers. Good and bad loans are being acquired.

Nama is vigorously fighting McKillen’s action, saying it represents “a very real threat” to its vital work, a central plank in the Government’s bank rescue plan.

Nama now claims that the loan on the adjoining Berkeley property is a development loan and eligible for transfer to the agency, bringing in the rest of his loans.

Mr McKillen claims the building is an investment property – and not a development site – which has tenants paying rent that covers the repayments on the loan.

The property, which overlooks Hyde Park in one of London’s upmarket areas, was bought for a planned expansion of the Berkeley, including 27 new bedrooms. It covers about 35,000sq ft and includes rented apartments.

Nama had claimed that Mr McKillen’s loans were eligible for transfer to the agency as they were associated with financier Derek Quinlan, whose loans were transferring to Nama.

Mr Quinlan and Mr McKillen are shareholders in the Maybourne Hotel Group, which is behind the Berkeley, Connaught and Claridge’s hotels in London.

The loans agency later argued that Mr McKillen and his companies were systemically important because of the scale of his connected debts across a number of Nama banks.

Mr McKillen is challenging Nama on the transfer of €80 million in loans from Bank of Ireland.

However, he is connected to loans totalling €2 billion at banks participating in Nama, though several partners share responsibility for these loans and his personal exposure covers a portion of this.

The so-called “McKillen connection” covers €800 million in loans at State-owned Anglo Irish Bank.

Both Mr McKillen and Nama have lined up large teams of corporate and constitutional lawyers and expert witnesses to debate the eligibility of his loans and those of his firms for transfer to the agency under the Nama legislation.

McKillen has hired Nobel prize-winning economist Joseph Stiglitz among other expert witnesses to swear affidavits in the case, while Nama has affidavits from Trinity College Dublin economists Philip Lane and Dermot McAleese.