BACKGROUND: AT SOME stage today in the High Court, senior counsel Cian Ferriter will begin laying out the National Asset Management Agency’s case against Treasury Holdings’ bid for a judicial review of the State agency’s decision to appoint receivers to assets owned by the property developer.

Nama’s case, however, has already been laid before the court in a series of affidavits from senior personnel dealing with the case. These affidavits give Nama’s side of events for the first time.

In an affidavit dated February 3rd, Mary Birmingham, a senior portfolio manager with Nama dealing with Treasury and related entities, said allegations by the property developer of bad faith by the agency in how it proceeded to enforcement were “simply without foundation”.

She said affidavits from Treasury’s managing director John Bruder detailing the events that led to Nama’s enforcement decision had not “fairly or properly characterised many of the events” that he mentioned.

She makes it clear that there has been no refinancing proposal from Treasury regarding its debts.

Instead, the three separate proposals submitted by Treasury to Nama – from CIM, Macquarie and Hines – were all predicated on Nama funding the acquisition of a large portion of the group’s par debt with the agency.

The proposals also involved “ongoing Treasury and shareholder involvement”. In return, Nama would get a small upfront cash payment, a deferred and discounted consideration, and would lose the guarantees it holds on the loans.

Ms Birmingham also dispelled the idea that Nama had not supported Treasury since its loans were transferred in 2010. She highlighted how Nama had provided €103 million for capital expenditure and construction costs associated with the Montevetro building on Barrow Street, which was sold to Google.

In addition, the agency had allowed Treasury use its own cash resources to fund its operations rather than paying interest to Nama, as it was contracted to do.

Ms Birmingham makes it clear Nama appointed receivers to Treasury’s assets as it would “likely lead to a better return for the State than continuing to fund the group as its financial position further deteriorates”.

“The point has been reached, regrettably but inevitably, where the group is insolvent, and past the point of commercial rescue,” Ms Birmingham adds.

To substantiate this view, her second affidavit, dated February 13th, details deteriorating cash balances over a 13-month period at Treasury and Real Estate Opportunities (REO), a UK-listed company in which Treasury is majority shareholder.

Treasury’s cash balances fell from €20.5 million in November 2010 to €2.3 million in December 2011, the affidavit says, while cash balances at REO declined from €15.3 million in November 2010 to €1.8 million in December 2011.

Nama bought €1.7 billion of loans from Irish banks for Treasury and related entities. In addition, Treasury had non-Nama debt – including Battersea Power Station in London – of about €1 billion, she said.

Treasury’s accounts for the 12 months to the end of February 2010 show it had net liabilities of €859 million. According to Ms Birmingham, Niall O’Buachalla, Treasury’s finance director, informed the agency on July 12th, 2011, that Reo would run out of cash in August, with Treasury doing likewise in September.

She says this position was reiterated by Mr Bruder at a meeting with Nama chief Brendan McDonagh on July 14th.

All of this might have been enough for Nama to move to enforcement but the affidavits outline other major issues it had with Treasury and owners Johnny Ronan and Richard Barrett.

About March 22nd, 2010, close to the time Treasury’s loans were being prepared for transfer to Nama, Treasury approved the transfer of €20 million worth of shares in China Real Estate Opportunities – a related entity – to Mr Barrett and Mr Ronan. In return, Treasury received an “unsecured loan note and €100,000”, Ms Birmingham says.

Nama has since sought the reversal of this transaction, as its “clear effect was to diminish the assets available to creditors of Treasury, including Nama”.

Mr Bruder has characterised this arrangement – known as the Tail transaction as the entity that acquired the shares is called Treasury Asia Investments Ltd – as having taken place at market value and paid for by way of a loan note.

On October 27th, 2010, Nama rejected Treasury’s business plan but indicated it would continue to support the group on the basis that it revised the plan and, among other things, reversed the China share transfer.

On September 2nd, 2010, a US-based private equity firm called CIM proposed to acquire certain Treasury debt from Nama. It proposed a cash payment of €81 million with a balance of €724 million to be financed by Nama. The deal came close to being realised in March 2011 but Nama insisted the Tail deal be reversed.

On March 15th, 2011, Nama received an email from Mr Barrett stating Mr Ronan was “not satisfied” by the proposed resolution of the Tail transaction as he had made “other arrangements” for his share of the Tail capital and income.

In May last year, CIM cut its offer by €180 million, which Nama rejected. The Tail transaction has never been reversed.

Ms Birmingham also outlines Macquarie’s offer. This was worth €570 million to Nama, with €67 million in cash upfront and the balance with vendor financing provided by the State agency.

Ms Birmingham states under this proposal, Treasury’s shareholders/management would have benefited to the tune of €80 million on top of management fees of €42 million over seven years. It would seem this scenario was unacceptable to Nama.

Similarly, Hines’s offer involved a relatively small upfront payment with Nama providing vendor financing on a non-recourse basis.

Both of these proposals were brought to Nama last month, after its enforcement decision.

Nama rejects Treasury’s assertion that it did not give due consideration to these proposals during the 14-day standstill agreement in January. Nama notes it hired PwC to evaluate the proposals and gave extensive time to them before deeming they were not commercially acceptable.

The hearing is due to finish on Friday.