Bitter battle moves back to the boardroom

ANALYSIS:YESTERDAY'S RULING in the bitter battle for control of three luxury London hotels means the war moves from the courtroom back to the boardroom, though Paddy McKillen wants another outing in court to appeal parts of the ruling.

The court ruled that twin brothers Sir David and Sir Frederick Barclay did not unlawfully seize control of Coroin, the company behind the Connaught, the Berkeley and Claridge’s hotels, by bypassing an agreement of shareholders.

The result has left the Barclays with control of the boardroom of Coroin through a 28.4 per cent stake they amassed and by being bankers to debt-laden Derek Quinlan, who has a 35.4 per cent shareholding in the hotels.

This gives the Barclays’ side voting control and allows them to push through a rights issue to reduce the £660 million (€800 million) debt on the hotels, which the court said should be between £450 million and £500 million.

A £200 million cash call on shareholders would mean McKillen would have to find £72 million to maintain his shareholding.

The judge found that even though McKillen argued for first refusal on Quinlan’s shares, he didn’t have the financial wherewithal to buy a 20 per cent stake that he would have been entitled to in 2011 from Quinlan’s interest.

Things have changed since then. McKillen agreed a deal with the Qatari royal family last March through which they agreed to share ownership of the group if he could force the Barclays out.

McKillen told The Irish Times yesterday that a rights issue wasn’t required as there are fresh offers of £660 million in debt but he stands ready to move.

“If it does come up, we will subscribe to a rights issue,” he said.

Even though McKillen faces a legal bill running to about £15 million from the case, he says he is happy to pay it – he claims the ruling confirmed his right to pre-emption on Quinlan’s stake.

If the Barclays’ side had any doubt about his financial ability to buy his entitlement of Quinlan’s shareholding, the stake should be sold, he said. “If they don’t think I can, roll it on – test me.”

If he acquired the shares, it would give McKillen a controlling interest of 56 per cent.

McKillen says Quinlan’s financial position mean the shares will have to be sold soon. He denied he faced stalemate in the boardroom.

“It’s a bigger stalemate for them [the Barclays]. They have spent over a quarter of a billion amassing shares and debt of Quinlan, and they have only got 28 per cent of the company,” he said.

The former Anglo Irish Bank, which is owed €60 million secured on McKillen’s shares in the hotel, said it was reviewing the judgment to see “what implications, if any, there are for the bank”.