Updated: 23/02/12 : 06:44:07
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'Treasury past point of commercial rescue' - NAMA

HOPELESSLY INSOLVENT -- "and past the point of commercial rescue" -- that was the National Asset Management Agency (NAMA) description of Treasury Holdings in the High Court yesterday (Wedsneday).

Treasury has been funded by NAMA, cannot fund itself, and NAMA had allowed it use €100 million over the past two years to support its continued functioning rather than pay interest due to NAMA on loans acquired, the Court heard in affidavit from Mary Birmingham, NAMA Senior Portfolio Manager. The Treasury group of companies debts were quantified at €2.7 billion euro.

The portfolio manager at NAMA  said there was "grave concern" about the board of Treasury Holdings approving the transfer of €20.5m worth of shares to benefit the company's owners Richard Barrett and John Ronan, at a time when the board was aware their loans would be transferred to NAMA. Ms Birmingham said NAMA repeatedly asked Treasury to reverse the series of transactions approved by the Treasury Board.

The claims are all denied by Treasury, which seeks leave in the High Court to bring a judicial review to NAMA's decision to appoint a receiver over a series of properties in its portfolio, including Sligo town. The hearing enters its third day today (Thursday) before Ms Justice Mary Finlay Geoghegan. It is anticipated the hearing will take four days.

Unable to Repay

On the opening day, Treasury Holdings had claimed, inter alia,  in the High Court that a receivership appointed by NAMA "could collapse the Sligo town centre project" -- the site of the 80 million euro town centre development by Treasury subsidiary Callside, centred on Debenhams proposed  46,000 square feet plan over three storeys. This is due to open by Christmas 2013.

In opposing Treasury’s application for leave to bring the challenge to NAMA’s decision to call in loans and appoint receivers over various Treasury properties, Ms Birmingham also said the group’s shareholders were providing no financial support for it and it was unable to repay its debts. NAMA acquired €1.7 billion of Treasury loans in 2010, while the group has additional debts of about €1 billion, she added.

The Court heard from NAMA that the proposed investment proposal advanced by Treasury Holdings was not actually an investment in the interest of either NAMA or the public but would benefit Treasury’s management and shareholders by about €80 million over a period of years, plus an annual management fee of €6 million.

In an affidavit for Treasury's Group Finance Director Niall O'Buachalla said he was “at a loss to understand” what had occurred in Treasury’s relationship with NAMA to lead to NAMA’s decision to appoint receivers. NAMA had constantly changed its requirements of Treasury, including concerning Treasury’s creditors and tax strategy, he said in the affidavit read by Senior Counsel.

Deeply Damaging

Treasury director Richard Barrett said in another affidavit that  if an injunction was not granted restraining the receivers acting, the Treasury group would suffer loss that could not be compensated for in damages. Any move to sell assets speedily would be deeply damaging to the wider Treasury portfolio.

Mr Barrett's affidavit, also read by Treasury's Senior Counsel Michael Cush,  said he was concerned NAMA’a actions were threatening Treasury China Trust, with assets in mainland China valued at €1.5 billion. He also claimed NAMA had engaged in no discussions of any real substance with two proposed “bona fide investors” and had given no satisfactory explanation why those proposals had been rejected.

NAMA denies the disputed decisions were made in breach of Treasury’s rights to fair procedures or that NAMA acted in “bad faith” concerning the timing of the receivership decision. The bad faith claim is based on allegations including NAMA chose to call in the loans and appoint receivers when, it is claimed, NAMA knew Treasury was in active negotiations with “investors”. NAMA claims neither proposal involved actual “investment” in Treasury. The proposals, if accepted, would require NAMA to finance the loan purchase via deferred consideration for the loans with relatively small upfront cash payments by the new investors in Treasury, NAMA claimed.

Under both proposals, the proposed consideration was significantly less than the debt owing to Nama and it was concluded "neither was in the best interests of NAMA or the taxpayer." Treasury contends the transaction was valid and the shares were sold at market value to its directors Richard Barrett and Johnny Ronan and paid for via loan note. The NAMA portfolio manager, Ms Birmingham, said that at no stage had NAMA accepted the propriety of that transaction, but Treasury had refused to reverse it and had said again last January it was “a valid transaction."

NAMA'S Senior Counsel Cian Ferriter is expected to begin the challenge against Treasury's claim to seek judicial review when the hearing continues with day three today (Thursday).