IBRC faces legal battle with borrower over loan deal
THE IBRC is facing a lawsuit from another of its major borrowers after its special liquidators shot down a deal they had been negotiating with the bank prior to its liquidation to pay off a multimillion-euro loan, the Sunday Independent has learnt.
Clarendon Finance and its US sister firms, 265 Franklin Street Associates and 330 Washington Street Associates, issued legal proceedings in the High Court in Dublin last month after special liquidators Kieran Wallace and Eamon Richardson rejected the deal, which could have seen the loan being refinanced in its entirety by another finance house and the IBRC repaid.
Neither Clarendon nor the IBRC were prepared to comment on the matter when contacted by this newspaper. But if the legal battle does proceed, it will shine a spotlight into the affairs of the bank and the manner in which the special liquidators have been conducting their business since the Government decided to pull the plug on the IBRC last February.
Clarendon Finance is owned by Talmak Investments Group, a property company headed up by Tony Leonard and Belfast-born property investor Paddy McKillen.
Mr McKillen, who has been involved in a long-running battle with the Barclay brothers for control of Claridge's, Berkeley and Connaught hotels in London, already initiated legal proceedings against the IBRC's special liquidators last April for refusing to accept an offer to repay €179m that he owes the bank.
It is understood that the €179m payment was rejected on the basis that the bank would have to forego the collection of early repayment penalties, believed to be in the region of €7m, that had been written into the Belfast businessman's original loan agreement.
The board of the IBRC had already made a commercial decision to waive the requirement for Mr McKillen to pay the €7m penalty to encourage him to pay down the €179m debt ahead of schedule.
According to the terms of his original loan agreement with the former Anglo Irish Bank, Mr McKillen was legally entitled to keep the debt with the IBRC until 2016 on a low fixed-interest rate.
Given the distinct shortage of credit available internationally for property lending, it is understood that Mr McKillen was happy to keep his loans with the IBRC and to continue repaying them in the normal fashion. Having been assured that early repayment of the €179m would not leave him saddled with the requirement to pay the €7m penalty fees, however, Mr McKillen went in search of and secured refinancing of the massive debt from two major international financial institutions.
Quite apart from the opportunity to secure the early repayment of such a substantial sum from one of its biggest borrowers, the IBRC is understood to have been minded to the other major benefit the reduction in the size of its overall loan book would deliver for the Irish taxpayer.
Were the €179m in loan facilities to have remained with the IBRC for a further three years, the bank would have been required under strict ‘Tier 1 capital ratio' regulations laid down by the Central Bank to hold an additional €14.4m in capital (8 per cent of the amount lent to Mr McKillen) on its books to balance the notional risk it faced in connection with the loan.