Property investor Paddy McKillen, who owes €2.1bn (£1.8bn) to Irish banks, has revealed that he is in breach of some of his loan agreements.
But the Belfast-born tycoon has insisted in a landmark legal action against the Republic’s ‘toxic bank’ — the National Assets Management Agency — that he is not an impaired borrower and that his loans are fully performing and meeting all interest payments.
Yesterday a specially convened three-judge divisional court, led by High Court president Mr Justice Nicholas Kearns, sat in Dublin.
It was told that there is no basis for NAMA's view that the total exposure of Mr McKillen and his companies through loans from the five participating institutions in NAMA represents a “systemic risk” to the Republic’s banking system justifying the loans' acquisition.
The judges heard that Mr McKillen's income generated by 62 properties, valued at between €1.7bn (£1.5bn) and €2.28bn (£2bn), was some 1.7 times the interest payable on the borrowings, which his legal team claimed was an “excellent performance” in the current climate. Senior Counsel Michael Cush, for Mr McKillen, said that while there may be some breaches of bank covenants and some loans had expired, this did not mean that loan repayments were under threat.
NAMA disputes Mr McKillen's claim that none of his loans are impaired.
Mr McKillen, on the first day of a two-week action, has claimed that NAMA's decision to acquire €211m (£183m) loaned by Bank of Ireland (BoI) to him involved a “total” invalidation of his rights.
With 15 of his companies, Mr McKillen has brought judicial review proceedings claiming the BoI loans' acquisition is unjustified, unfair, and breaches his constitutional rights to property and fair procedures.
He also claims it breaches the February 2010 European Commission Decision approving the establishment of NAMA on the grounds that decision relates to acquisition of loans from “impaired” borrowers.
He also argues the link with NAMA means serious adverse effects for him personally and his business interests.
NAMA, which plans to acquire some €73bn (£63bn) in loans by February 2011 from 800 borrowers, denies the claims, argues it is entitled to acquire both performing and non-performing loans, and disputes Mr McKillen's claims none of his loans are impaired.
Opening the case, Michael Cush SC said most of Mr McKillen’s 62 properties are located in the UK, France and the US with some 26% in Ireland and loans secured on them totalled some €2.1bn (£1.8m), with all loan repayments being met.
The assets were generating €150m (£130m) per annum and some 96% were let, mainly on 25- year leases, the lawyer said.