Investor fights NAMA decision to acquire loans
Mr McKillen claims there is no basis for NAMA’s view the total exposure of himself and his companies of €2.1 billion through loans from the five participating institutions in NAMA represents a “systemic risk” to the banking system here justifying the loans’ acquisition. He claims his loans are fully performing and unimpaired.
With 15 of his companies, he has brought judicial review proceedings in the High Court claiming the BoI loans’ acquisition is unjustified, unfair, breaches his constitutional rights to property and fair procedures and breaches the February 2010 European Commission decision approving the establishment of NAMA on grounds that the decision relates to acquisition of loans from “impaired” borrowers.
He also argues the link with NAMA, which he describes as a “bad bank”, means serious adverse effects for him personally and his business interests.
The case opened yesterday before a divisional High Court consisting of the president of the High Court, Mr Justice Nicholas Kearns, Mr Justice Peter Kelly and Mr Justice Frank Clarke. Attorney General Paul Gallagher is heading NAMA’s legal team, underlining the importance of the case to the state.
Mr Justice Kearns observed Dermot McAleese of Trinity College had, in an affidavit for NAMA, said there could be no return to the “status quo” and had also asked, if it were not for NAMA, where would the banks be?
Opening the proceedings, Michael Cush, counsel for Mr McKillen, said the case was not about whether NAMA was a good or bad idea or an effective model to deal with the state’s economic difficulties. Nor had the court to rule on the merits of NAMA’s decision to acquire Mr McKillen’s unimpaired loans or unimpaired loans generally, whether his loans represented a “systemic risk” or the precise valuations of his properties.
The court was being asked to determine public, not private, law matters, he said.
Mr Cush said Mr McKillen is principally a property investor with a portfolio of 62 properties valued somewhere between €1.7bn and €2.8bn depending on valuation dates.
Most of the properties are located in Britain, France and the US, with 26% in Ireland and loans secured on them totalled €2.1bn with all loan repayments being met. Income generated by the properties was 1.7 times the interest repayable on the borrowings, an “excellent performance” in the current climate, while the assets were generating €150m per annum and 96% were let.
While there may be some breaches of some bank covenants and some loans had expired, this did not mean repayments were under threat, he added. Historically, all of Mr McKillen’s loans had been renewed as he always met repayments.
Only a very small proportion of the loans, about 2.5%, were land and development loans within the meaning of the NAMA Act 2009, but once some loans fell into that category, NAMA could acquire all of them, counsel added.
Mr Cush said his case centred on five key points.
Firstly the procedure adopted by NAMA and the broad definition of “eligible bank assets” in the NAMA Act denied Mr McKillen’s constitutional right to property and fair procedures.
There was no legal case which allowed complete abrogation of the right to make representations prior to acquisition of loans and Mr McKillen was shut out by the act from any remedy.
It was also argued that NAMA, in exercising its discretion whether to acquire the loans, failed to have regard to relevant considerations and the December 11/14, 2009, decision to acquire the loans was taken prior to the actual establishment of NAMA, was not validly ratified and was null, void and of no effect.
Having regard to the February 2010 EC decision approving NAMA, it was argued at least some of a borrower’s loans must be impaired before any are acquired but none of Mr McKillen’s loans were impaired. If that was incorrect and it was also wrong to argue fair procedures must be read into the NAMA scheme, then the relevant provisions of the NAMA Act are unconstitutional given the breadth of the definition of eligible loans.
NAMA’s only record of its decision to acquire €2.1bn in Mr McKillen’s loans was contained in one word – “disagree” – on an Excel spreadsheet, he said. NAMA contended that word recorded NAMA’s disagreement with bank objections to the eligibility of the loans for acquisition on the basis the loans involved no land and development exposure.
NAMA denies the claims, and argues it is entitled to acquire both performing and non-performing loans and also disputes Mr McKillen’s claims that none of his loans are impaired.
The case continues.
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