Nama, which acquired €1bn of Treasury’s €2.7bn loans in April and May last year after the disputed TAIL transaction of Mar 22, 2010, claims there was no commercially valid reason for that transaction made when Treasury was either insolvent or in very difficult financial circumstances.
The transaction was for “a significant undervalue”, impaired the rights and interests of Nama as the major creditor of Treasury and was made with the intention of defrauding bank and/or other creditors of Treasury, it alleges.
In entering into the transaction, Mr Barrett and Mr Ronan failed to act in the best interests of Treasury and/or its creditors, breached their fiduciary duty to the company and creditors and breached the Nama Act, it is claimed.
In an affidavit, John Bruder, managing director of Treasury, said the TAIL transaction was not illegal and there was a valid commercial reason for it. He also argued Nama’s handling of Treasury’s efforts to sell the group’s Nama loans had damaged efforts to reach agreement on the TAIL issue.
The proceedings were transferred to the Commercial Court yesterday by Mr Justice Peter Kelly on the application of Paul Sreenan, counsel for Nama.
Michael Collins, counsel for Treasury, said it was neutral on transfer but believed the proceedings were premature and the TAIL issue was best addressed by mediation. His clients had never accepted there was anything wrong or improper with the transaction, he said.
Mr Sreenan indicated there was no point to mediation as Nama was not prepared to accept less than reversal of the TAIL transaction.
The judge said while Treasury had also argued the Nama case was premature as Treasury’s judicial review challenge to the manner in which Nama called in its loans had yet to be heard, the judge noted the Treasury case related to the procedures adopted by Nama and, even if Treasury won, it could not stop this case. He approved a schedule for exchange of legal documents and returned the matter for mention in October.
The case relates to the Mar 22, 2010, TAIL transaction where €20m shares in China Real Estate Opportunities were transferred by three Treasury subsidiaries into another wholly owner Treasury subsidiary — Daylasian — for unsecured 10-year loan notes with a face value of some €18.4m.
Nama claims the economic effect of that transaction alone on Treasury was neutral as the loan note instrument represented an inter-company debt and the CREO shares remained beneficially owned by Treasury. However, Nama claims, on the same date, the defendants caused Treasury to transfer its interest in Daylasian to Mr Barrett and Mr Ronan for €100,000, leaving Treasury with an unsecured loan note instrument from what was no longer a group company.