BUSINESSMAN Richard Barrett has defended his acquisition this week of two subsidiaries of Treasury Holdings that carried out management functions for Singapore-listed Treasury China Trust (TCT).
Mr Barrett, a Treasury director, has told The Irish Times that he paid €2.263 million in cash to buy the two businesses – Treasury Holdings Real Estate Pte Ltd, and Treasury Holdings (Shanghai) Property Management Co Ltd.
The companies were owned by Treasury Holdings China Ltd, a wholly owned subsidiary of Treasury Holdings, and provided services to TCT’s commercial property portfolio in China.
They were acquired on Monday night by a Jersey-based entity called Oriental Management Services Ltd, which is controlled by Mr Barrett.
The deals were announced to the Singapore stock market.
On Tuesday the transactions were mentioned in court by KBC Bank Ireland and the National Asset Management Agency during a hearing on a winding-up petition filed by KBC.
Nama changed its stance on that action from “neutral” on Monday to joining KBC in pursuing a winding-up of Treasury as a result of the deals emerging.
While the acquisitions had been in the offing for some time, the timing was prompted by Mr Barrett’s concern that Treasury could have been placed into liquidation on Tuesday. He said this could have had “catastrophic” knock-on consequences for TCT.
Mr Barrett said the sale price reflected the higher of two independent valuations, which involved adding the balance-sheet value of the companies to a multiple of future projected profits. The balance sheet net asset value was €1.9 million-€2 million.
The future profits were listed at €1.68 million for this year and €108,000 in 2013. Losses of €96,000 and €313,000 were listed for 2014 and 2015 respectively, while a profit of €28,000 was projected for 2016.
The year-to-year differences reflect likely changes in the portfolio.
Mr Barrett said two “top 10” accountancy firms in Ireland, which are not its auditors, conducted the valuations.
He said a liquidation of Treasury Holdings could have had disastrous results for TCT and its 500-plus Irish retail investors.
TCT raised a bond with Forum Partners to finance acquisitions, of which €44.5 million is currently owed. There is a provision in the bond agreement that if control of Treasury Holdings changes, Forum has the right to demand immediate repayment. In effect, a liquidation of Treasury would trigger a default.
TCT, which develops commercial property in China, does not have the free cash to repay the bond in the event of a default and could itself end up being liquidated.
Any collapse of TCT would deprive Treasury Holdings of the cash payment, Mr Barrett argued.
“Treasury Holdings needs money to keep going.”
Mr Barrett said the employment of the 100 staff at the two Treasury subsidiaries would have been jeopardised in the event of Treasury Holdings being liquidated.
“I hired most of them and and I have a personal connection with them,” he said.
“There is nothing to hide here,” Mr Barrett continued, adding that under section 139 of the Companies Act 1990 any transfer of assets made by a company that then goes into liquidation could be reversed if it was not done at fair market value.
Mr Barrett said he thought a settlement with KBC had been agreed last week, which would result in the winding-up petition being withdrawn.
At the end of last week, he was informed that KBC would not be settling, and he then decided to proceed quickly on the two acquisitions. “KBC stopped talking to us,” he said.
He said Nama was informed of the proposed transactions “several times” over the past nine months, as a courtesy.
Mr Barrett said he wrote to the Nama chief executive Brendan McDonagh on Wednesday night to seek a meeting and “give him all the papers”.
Treasury Holdings has recently sought to bring Morgan Stanley in as an investor but Nama and KBC have yet to agree to the terms.
KBC’s winding-up action has been adjourned to October 9th.
