The billionaire Barclay brothers, who are battling property developer Patrick McKillen for control of three London luxury hotels, have made repeated bids to buy his €300 million in personal debt held by Irish Bank Resolution Corporation.
Under the three-part offer, the brothers would pay €150 million for IBRC-held debts on Mr McKillen’s stake in the Berkeley, Connaught and Claridge’s hotels; £50 million for security on other debts, along with offering to return to IBRC 90 per cent of all other debts recovered from Mr McKillen.
The proposal, rejected by IBRC, was first made by Barclays executive Richard Faber in December 2011 and several times since, including after the High Court in London rejected a case taken by Mr McKillen in July.
The offer was refused on grounds it would make it more difficult for Mr McKillen, who has property investments ranging from London to Vietnam, to repay the €1.3 billion of corporate debt he owes the IBRC.
Mr McKillen believes the focus on the Barclays’ offer to buy his debt is an attempt by them to put IBRC in a politically difficult position and, also, to damage his business interests.
IBRC was offered an upfront €100 million payment for the security on Mr McKillen’s shares in the hotels’ holding company, Coroin, along with a later €50 million payment linked to performance – though the latter sum could be paid immediately, if necessary.
If delayed, the €50 million payment could fluctuate, but would be paid within two to five years at a time of IBRC’s choosing. The final sum would be judged by an independent review, and by a second, if the valuation was disputed.
Another €50 million, secured on other McKillen loans unconnected to the London hotels, would be paid as they are recovered from Mr McKillen, with the balance paid on the second anniversary of the debt’s purchase.
The €150 million for the Coroin security equals the amount accepted by the National Asset Management Agency when it sold a 13.3 per cent security on Coroin shares held by financier Derek Quinlan to Malaysian investors, JQ2, the Barclays have argued.
Nine-tenths of everything else recovered from Mr McKillen above €200 million – above and beyond that covered by Coroin security – would be given promptly to the IBRC as long as the Barclays are satisfied that no successful legal challenge could be taken.
For comfort, IBRC, which took over debts given by Anglo-Irish and the Irish Nationwide Building Society, would be given copies of all financial information and be entitled to a non-voting observer at meetings of the Coroin board.
During communications with the IBRC, Mr Faber, The Irish Times understands, warned IBRC that the value of its Coroin security could fall if Mr McKillen is unable to participate fully in a rights-issue due shortly. However, Mr McKillen insists he will take part, though he objects to it. Qatari investors are prepared to lend him enough to take part. This will have to be agreed by IBRC, which partly explains the Barclays bid to maintain pressure.
Questioned about the Barclays offer, IBRC said it had “a strict legal obligation not to discuss its dealings with individual borrowers of the bank in the public domain and therefore cannot comment on any of the specific details of this case”.
Questioned by TDs in October, IBRC chief executive Mike Aynsley defended sending two texts to Mr McKillen after the IBRC board had rejected Barclay offers to buy his debts. In one, Mr Aynsley had written: “BB [Barclay brothers] have now been told that the bank has chosen a path to work consensually with you rather than to deal with them. I understand they are not happy!”
Later he urged Mr McKillen to keep the information confidential.
