Developer McKillen takes first legal challenge against Nama


Is there not a case in that of itself as to whether the developer was tricked or hoodwinked into the Anglo loan and how could he be in default if the loan itself was non-recourse?


That’s the bit that set my alarm bells ringing - but for a different reason!

If that’s the best they got on him, it makes me think that their defence is shite.

Surely they have loans that relate to property that are failing to be serviced? Complaining about a circle-jerk loan that Anglo (And who knows what the FR/CB were saying!) dragged him into seems very weak!


Agree with WGU. If they are leading with the non-recourse loan to buy Anglo shares, they must be on thin ice. Safe to assume that that loan is the weakest piece of documentation in the whole of Anglo, which is saying something.

What is at stake for the State is not really the transferability of the loans (generally, commercial loans are fully transferable to any other bank), it is the Enron-like SPV structure of NAMA. They need “good” loans to keep the government guaranteed NAMA bonds off the official government balance sheet. However, they also need ALL the cash flows (interest and repayments) from those loans to pay the interest in the bonds they are issuing to the banks. So a good borrower who might get fresh credit from a true bank (that actually wanted to lend) would seek to refinance so he / she could continue to invest / develop. But NAMA will have done its sums on the contractual cash flows and won’t want to deviate.

McKillen may have offered to buy his loans back at a discount and was turned down as NAMA needed the full cash to make the numbers work.

Now the game is quite high stakes. The loans will probably transfer all right but McKillen might expose the myth that NAMA is not 100% government guaranteed and cause Eurostat etc. to add the NAMA loans to Brian L’s tab. Or he could find a constitutional chink in the legislation (drafted late into the night by the geniuses at the DOF so no risk there…) and really gung up the works.

NAMA could of course reconsider selling the loan back to him at a discount; I’d say there are banks abroad that would certainly partly refinance him. If there aren’t, then he probably will default eventually anyway. If the case starts to go against NAMA, don’t be surprised by a quick settlement out of court. McKillen is spending all this money for his own interest, not our entertainment or the public interest.


then all the others will pile in and gum the works up.


@Duisigh: Not so sure how many other solvent big developers there are with the resources to do this. McKillen is spending millions and still has a reputation to lose. He is a Nordie with lots of future in the UK. NAMA has a lot of dirt on most of the others.

It reminds me of Paul O’Neill when Bush’s cronies were pushing him out of office as Treasury Secretary. “I’m old and I’m rich; there’s not much they can really do to me…”. That’s basically where McKillen is.


Every paper in the country is saying that!


I think its a non-case. The Bill has specific provisions that prevent any constitutional challenges and sets aside large swathes of Commercial and Contract law. Plus if the situation gets sticky the minister can just publish a ministerial order that sets aside any challenge. On any subject.

The NAMA Act is an emergency powers Act with almost no oversight and no meaningful mechanism for appeal. The minister is the final arbiter of whether a loan is in or out. End of story. The rule of law has been set aside.

Of course if the plaintiff wants to make his challenge under European Law then things will get interesting. But by the time that case would come up in Luxembourg the whole subject will be history by then anyway.


Any bank can sell on a loan though. A lot of our mortgages have been sold on as have a lot of commercial property loans through syndication.


That would be unconstitutional…


:smiley: That’s what I was wondering!


That very point was raised during the debate in the Dail. Which is why I said it was a special powers act. Special powers act trump the constitution once you set aside the right to mount a constitutional challenge. Its not like they have not done this before.


The argument at the heart of McKillen’s case seems weak.
Everything rests on his claim that he is not an impaired borrower.
And this depends on how one chooses to value his assets.
McKillen believes his 50% of the Jervis Centre is worth €251 million whereas Pinsters can tell him it’s not and hence

This renders his two main points a little silly

And why does the creditor prefer cash?

The value of his assets aren’t falling because of the company he keeps.

Common sense says the courts won’t back him and he might even settle early.
(jmc’s point above about the powers of the minister is a good one)

Still, this is the Irish judicial system that let a girl procure an abortion because she was threatening to do something illegal if they didn’t. Who knows?



This is a very good point, one that had not been made clear before. Enforced roll-over of loans must surely count as impaired? (Whatever the expectation of the borrower that because the loan was rolled over before it would be again).

edit: it does also give NAMA ferocious power - they can demand immediate payment at a rollover date on any loan they choose to and so bust that loan, since the chances of getting refinanced elsewhere must surely be low?


Actually I think McKillen makes a case sufficient to hole NAMA below the waterline.

Part of the problem apart from the intention to bail out the mafia, is that the quality of parliamentary bill drafting over the last 20 years has been shocking. There have been Acts that a first year law student could have declared as unconstitutional on one readng.

This is due in part to the fact that for many years it has been policy to hire lawyers often retired, from jurisdictions which have nothing in common with or undertanding of our mix of common law and written constitution, to draft legislation, including honchos from Hong Kong.

NAMA even disabled as it now probably is, is even more of an expensive scew-up.

I thought Lenihan looked particularly downbeat today, quite irrespective of any health problem


Interesting. What do you see as his strongest argument ?


You misunderstand the basis of impairment. It is not based on the value of the underlying assets, rather the ability to repay. His central argument is that his borrowings of 2.1B are supported by a rent income of 150M pa. The value of the assets is really irrelevent.



I haven’t had a chance to read the grounding affidavits which I believe are now in the public domain.
That being the case I am not well placed to offer a view as to what his strongest argument might be. That said, have a look at the difficulties with the Private Rented Dwellings legislation in he early eighties and the jurisprudence on unenumerated property rights.

I think he is on quite strong ground where performing loans are dumped in with non-performing ones. Certainly the issues of fair procedures and natural justice arise as does the right to your reputation, irrespective of defamation law.

This will run.


I’ve read through start of Stiglitz’s (yes, he of Nobel and world’s most widely cited economist fame!) affidavit in favour of McKillen.
He makes seven points, summarised here in twitter format:

  1. Gov response to banking crisis deviates from best practice, esp re acquiring assets - should stick to bad loans
  2. NAMA has extraordinary and unprecedented powers to underpay for good assets, potentially for political gain
  3. Underpayment does not benefit banks or taxpayer (recapitalisation) and harms good borrowers, as NAMA is not a bank
  4. The mere transfer of loans to NAMA can destroy economic value, hurting banks, good borrowers and the economy
  5. NAMA’s affidavits do not explain any benefits to banks or to taxpayers of transferring good loans
  6. McKillen loans should remain in original banks. Broader point: NAMA should talk to borrowers but hasn’t
  7. NAMA should esp talk to borrowers who want out of NAMA. Danger exists of gov seizing property w/out fair compensation



Sorry for asking a stupid question and please move if necessary. Isn’t Nama uncompetitive anyway, because it can CPO what it terms “ransom” lands if it will aid in the selling of property? A normal developer can’t insist on a compulsory purchase order, so this renders it an unlevel playing field, does it not? I can’t understand why the EU allows unfair advantage to Nama.
Just a thought

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Interesting argument. Not great, but interesting.