Anglo Irish Bank has turned down a €200m (£167m) offer from the Barclay brothers for control of a loan owed by Belfast-born developer Paddy McKillen.
The offer is part of a battle being waged by billionaire investors David and Frederick Barclay for control of Coroin - the company that owns London's Claridge, Connaught and Berkeley hotels, known as the Maybourne Group.
The McKillen loan is secured on his minority stake in Coroin. The Barclays make no secret of wanting to squeeze out Mr McKillen, to gain complete control of the €800m (£667m) hotel chain.
A deal to buy the loan from Irish Bank Resolution Corp (IBRC) - formerly Anglo Irish Bank - is understood to have fallen through.
A source close to the Barclays said their €200m (£166m) cash offer was turned down by the bank, even though it could be IBRC's best chance to recover cash for taxpayers on the debt.
The offer was rejected even though the former bank is supposed to be selling off its loan book.
IBRC refused to comment, but sources close to Mr McKillen say he has never missed a loan payment.
Mr McKillen's associates say it means IBRC's best chance of being repaid is to hold on to the loan, not sell out of the asset.
IBRC is known to be wary of any deal on the debt, not least because the loan is just a small piece of Mr McKillen's total borrowing.
The scale of Mr McKillen's borrowings from IBRC mean the bank is looking at any offer in the context of the overall relationship with the borrower. Selling to his arch enemies would be sure to damage relations.
However, the loan could suffer because the Coroin stake securing the debt is already at risk of being diluted in a coming rights issue.
The Barclays want Coroin to raise £200m from shareholders as part of a refinancing. If it happens Mr McKillen will have to stump up £72m just to keep his stake. If he can't meet that his stake will shrink, and with it the real value of the IBRC loan.
Total worth of chain that owns three top London hotels