US investor Blackstone said yesterday it was entitled to demand the repayment of €16.7 million in personal debt from developer brothers Michael and John O’Flynn, and force their property and construction empire to default on its loans.
Blackstone acquired the Cork-based O’Flynn Group’s €1.8 billion debts from State agency Nama in May and now claims the business cannot meet its liabilities, giving the US fund the right to take control of its assets in Ireland, Britain and Europe.
The fund’s subsidiary, Carbon Finance, last week appointed receivers to the O’Flynn Group’s parent and some of its assets when the brothers failed to meet a demand for immediate repayment of €16.7 million in personal loans, from a total of €24.9 million due from them and others, that are part of the overall debt acquired from Nama.
Strategy
The O’Flynns argue they were not given reasonable time to respond to this demand and that it was simply part of a strategy designed to engineer a default on the group’s loans and allow Carbon to take control of their group’s assets.
In an affidavit opened in the High Court battle over the group’s control, Carbon director Lorna Brown rejects that the firm engineered the situation.
“Carbon demanded repayment of the relevant personal facilities as it was entitled to do and the plaintiffs failed to satisfy those demands, leading to an event of default under the personal facilities, and in due course to an event of default under the corporate facilities,” she says.
Her affidavit points out that the personal loans, which are secured against group assets, are repayable on demand and that the O’Flynns negotiated those terms with Nama when the group’s debts were restructured in February of last year.
Following Carbon’s appointment of receivers last week, the fund successfully applied to the High Court to have Michael McAteer of Grant Thornton installed as interim examiner to the O’Flynn Group’s four key trading firms in the Republic.
The building and property group is asking the High Court to overturn the receivers’ and examiner’s appointments. It argues that Carbon took those steps simply to gain control of the assets, something it has intended to do since Blackstone bought the debts in May.
Liabilities
Carbon rejects this and says the group is unable to meet its liabilities, including a €235 million repayment due at the end of this year. Ms Brown points out that the subsidiary from which this cash is due, Tiger Haymarket No 1 Ltd, failed to make repayments of £6.2 million and €1.35 million when they fell due last March.
Nama and its subsidiary, National Asset Loan Management, said it would not enforce its rights as a result, once there were no further defaults before the end of this year.
Ms Brown argues that those repayments had to be deferred, and it would be “inconceivable” that the group would be able to meet the €235 million repayment due on December 31st.
Ms Justice Mary Irvine is due to rule on the case next week.
