Inside the world of business

Moran’s lockout may have done some a favour

PLENTY OF business people around the country will have empathised with hotelier and publican Johnny Moran, who this week “locked out” a receiver and management company from his Dublin hotels.

Moran owes €18 million to Anglo Irish Bank. Part of the debt is performing, but €14 million of it, which is secured on his Holiday Inn property on Dublin’s Pearse Street, is arrears.

However, Moran argued that these arrears are manageable, the business is profitable and that he had been working with the bank to deal with the problem. On that basis, he said that the bank’s decision to call in the debt came as a surprise.

He barred the receiver, David Hughes, on the basis that Anglo’s decision to appoint him was invalid.

The two sides went to court, but the matter has now gone to mediation, which gives Moran an opportunity to argue his case, and holds out the the possibility of a solution that could work for both sides.

While banks are not popular these days, they have a right to take whatever steps are necessary to protect the security they hold, particularly given that the debtors agreed to the terms in the first place.

But not every debtor who is struggling now is necessarily a bad risk and businesses that have a chance of getting through the recession should be given that opportunity.

However the dispute between Moran and Anglo is resolved, the hotelier may have done others in his situation a favour by highlighting a potential solution.

Not, we hasten to add, barring receivers from their premises, but going for mediation, an option that both the banks and the businesses involved should look at if nothing else seems to be working.

It could well result in heading off at least some insolvencies at the pass and saving both businesses and jobs.

Banks’ court actions just do not add up

THE McINERNEY case may be drawing to a close but what exactly the banks were trying to do is still a puzzle.

The housebuilding group owes over €110 million to three banks, Anglo, Bank of Ireland and KBC. US investor Oaktree Capital offered them €60 million in reinstated debt around the time the group went into examinership last August.

That looks a good deal now, as the market value of the group’s property has since dropped to bring it in line with with Oaktree’s latest offer, €25 million.

However, the banks successfully argued in court that they would fare better over an extended 11-year receivership than under the rescue plan proposed by examiner Bill O’Riordan of PricewaterhouseCoopers.

The court agreed with them, but had to revisit the issue when it emerged that Anglo and Bank of Ireland were preparing to move their loans – around €80 million of the total – to Nama, ruling out the proposed receivership.

The institutions now argue that, on the basis that Nama values assets at their November 2009 levels, they would fare better if the agency took over the loans, and the rescue plan is unfairly prejudicial to their interests. So, why not make this argument in the first place? By the time the examinership started in August, the banks would have been well familiar with Nama and thus would have had a good idea of what to expect from the agency.

Perhaps the institution best placed to answer this is KBC, the Belgian-owned lender whose €30 million-plus loan is not going to Nama. Accepting an overall discount from Oaktree, whatever the amount, would mean that it would have lost out.

But if the State agency were to take over the Anglo and Bank of Ireland share of the debt, KBC would still have the right to recover its debt, irrespective of the discounts taken by the other two.

When it comes to managing the loan, Nama would be in the driving seat. But it’s possible that KBC thinks that it might be better to throw its lot in with the State agency and see what happens, than to accept a discounted settlement now.

If that were the case, all three banks were holding out for Nama to step in. The only hole in this theory is that it implies that the 11-year receivership was just a stalling tactic . . .