The Department of Finance raised concerns with executives of Irish Bank Resolution Corporation in 2012 about the sale of a multimillion-dollar loan linked to a high-profile residential block in New York and issues connected to Topaz, the fuel group that is now controlled by Denis O'Brien.
Documents released to The Irish Times under the Freedom of Information Act show that issues of proper governance around the sale of Apthorp, a condominium on Manhattan's upper west side, were raised by Ann Nolan, the head of the department's financial services division, at a meeting in July 2012.
In a briefing note prepared for Ms Nolan in advance of her meeting with the IBRC executives, officials said the department had received an internal memo from the head of group balance sheet management at IBRC, Robert Cameron, indicated “significant concerns” in relation to the Apthorp sale.
The memo indicated that the “provisioning on the Apthorp [deal] had been tailored to reduce the loan value to the estimated sales value”. The figure for the provision booked in February 2012 is redacted. The memo also stated that the “bank was not capitalised to sell at these levels”.
The officials highlight that the “concerns” of a senior member of the management team were not communicated to the board and that the board’s decision to approve the transaction was taken without this information having been presented to it.
The officials also raised concerns that IBRC was more focused on the fact that the memo had been sent to the department without authorisation from executives at the bank, rather than whether or not the “transaction was commercially appropriate”.
When Mike Aynsley, IBRC's chief executive at the time, was questioned as to whether he had seen the memo, he stated that he was on leave at the time.
The size of the loans or the sum paid are not revealed in the document. An IBRC file note states that Apthorp was not sold as part of the overall US loan book as “borrower consent was withheld” and suggests that the holder of mezzanine debt was “threatening litigation”.
Details of the deal were reported in August 2012 by Israeli publication Globes.
It stated that the $385 million mortgage debt had a balance of $225 million at the end of 2011 and indicated that Africa-Israel Investments and its partners had refinanced the loans.
It had earlier reported that Australia’s Macquarie Bank had issued $185 million in senior and junior debt to refinance the IBRC loan.
At his press conference yesterday, Alan Dukes, the former chairman of IBRC, said he met Ms Nolan and officials from the department in July 2012.
"We submitted all of our documentation on Apthorp and Siteserv to the Central Bank and asked for their comments," he said.
“The Central Bank had no comments. We thought the issue was closed.”
Mr Dukes added that selling Apthorp separately from IBRC’s main US loan book resulted in a “superior” sale price that if it had formed part of the portfolio sale.
On Topaz, the same briefingnote to Ms Nolan statessays thatthe department had been “informally approached by this customer” in relation to IBRC’s treatment of the business. “We advised that their concerns should be raised directly with the chairman [Alan Dukes].”
Topaz at the timewas controlled by Ion Equity, an investment group headed by Neil O'Leary. Mr O'Brien was a minority investor in Topaz but later took control of the business by acquiring its loans from the IBRC liquidators.
In a minute of a meeting between IBRC and the department in May 2012, Mr Aynsley had noted there could be “publicity given issues between” Mr O’Brien and Mr O’Leary.
