ANALYSIS:One of the biggest players in the development world is now considering filing for bankruptcy, writes ARTHUR BEESLEY.
PADDY KELLY ranked among the biggest players in the development world at the height of the boom, a man who could say “most of them are mine” when observing cranes over the Dublin skyline.
Now he is considering a bankruptcy arrangement, a victim of the wrenching decline in the property sector at home and further afield.
A mentor to many younger businesspeople, the Shrewsbury Road resident reaches retirement age next month under acute financial stress. A backer of numerous commercial, residential, retail, pub and hotel projects, he is well known for making large deals in partnership with other well-heeled investors.
Kelly told Eamon Dunphy on RTÉ radio last November that he owed “hundreds of millions” of euro to his bankers.
Extraordinarily, he maintained then that these debts were no great burden on him.
In recent weeks, however, the newly nationalised Anglo Irish Bank stopped any further drawings on a facility in place since February last year. The world is a different place now.
The dangerous state of his financial affairs spilled into the open in a legal case before Mr Justice Peter Kelly in the Commercial Court yesterday.
The proceedings relate to unpaid rents for €131,000 that Kelly owes insurance broker Hugh McGivern. In an affidavit, Kelly said it was a matter of great personal regret that he was unable to honour his financial commitments to McGivern and others.
Given the scale of Kelly’s own declared indebtedness, it seems pretty clear already that the rents he owes McGivern represent but a small aspect of his overall liabilities. While Kelly did not return a call yesterday evening, a well-placed source with knowledge of his business said particular difficulties have arisen in relation to three of his projects.
The first of these is Tulfarris House and Golf Resort, located on the shores of the Blessington lakes in Co Wicklow. Anglo sought the appointment of a receiver to that project last month.
The latest accounts for Comfort Holdings, a core company in the business, show that its borrowings exceeded €22 million in 2006.
“The company and its subsidiaries have incurred losses of €4,607,067 and significant further losses subsequent to year end,” the accounts state.
Kelly has encountered further difficulties on a vast $1 billion "Bayside" project at Sarasota, Florida. Last June he told the Sarasota Herald Tribunethe first of four high-rise towers would not be built until 2012, years behind schedule. He said then that the real-estate downturn had soaked up most of the equity that Irish investors had put in the project, an initiative backed by Anglo.
A prestigious, but expensive, project at Pragelato near Turin in Italy, once a venue for the Winter Olympics, is also said to have underperformed badly.
Kelly is famous for rebuilding his business empire after he incurred massive losses in the Lloyd’s insurance debacle in the late 1980s. As a Lloyd’s “name” along with his wife, he could not avoid severe financial distress at that time but managed to retrieve his fortunes.
Whether he can do so again remains to be seen. In court yesterday, he made it clear that his liabilities exceed his assets and was exploring the possibilities of instigating a bankruptcy process.
Famously, Kelly saw the rise of the Irish economy as part of history’s great sweep. In his interview with Dunphy, he said “it was time the Irish went through the front gate” when referring to a residential development he undertook on the Anglo-Irish Castletown estate. He also believed his ancestors in Co Laois had their land confiscated in the plantation.
When the history of the current collapse comes to be written, 2009 will surely be seen an as annus horribilus for the most illustrious figures in Irish business.
Only 12 weeks in, the year has already brought many titans of the Irish scene to heel. Whether Kelly proceeds with bankruptcy or not, he is clearly under great financial strain.
