ANALYSIS:Paddy McKillen's legal battle with the Barclay twins has shone a light on Derek Quinlan's work

THE ACCOUNT of the bitter takeover battle between Irish businessman Paddy McKillen and the British billionaire Barclay twins over three of the world’s most exclusive hotels has shone an illuminating light into the world of Irish investor Derek Quinlan.

Quinlan’s standing as Ireland’s most prolific international property investor and his headline-grabbing £750 million (€1.1 billion) purchase of the Savoy Hotel Group in 2004 gave him access to the world’s richest men. When it all fell apart in 2009 with the Irish economic crash and banking meltdown, Quinlan had to find buyers for three principal investments to settle his eye-watering debts.

One of those investments was Quinlan’s 35 per cent share in Claridge’s, Berkeley and Connaught hotels, what was left of the Savoy group after the sale of the Savoy itself by Quinlan and fellow shareholders in the Maybourne consortium for £230 million in 2005.

Quinlan’s efforts to repair his finances form the backdrop to McKillen’s battle to retain his 36 per cent ownership of the hotels, the group’s efforts to keep – and later refinance – €800 million of debt out of the National Asset Management Agency and the arrival of the Barclays on the scene in 2011.

That Quinlan only paid £10 million for an initial 20 per cent stake in the hotels in 2004 while the others investors invested £20 million points to his role as the dealbroker in the original transaction.

Apart from the hotels, Quinlan’s other major investments were a half-share of the Citibank tower in Canary Wharf in London – bought for £1 billion in 2007 – and another half-share of the head office of Spanish bank Santander in Madrid, which was acquired for €1.9 billion in September 2008.

By 2009, Quinlan believed the Santander property could generate a whopping €3.34 billion return – which would net him a capital gain of about €650 million – by selling it to a wealth fund owned by a Middle Eastern sovereign state. This investment was the reason why Quinlan and his family left Ireland in May 2009 for Switzerland. He had received tax advice at the time that he could only spend another seven nights in Ireland in 2009 if he was to make the most profit from the realisation of the Santander investment.

By October 2009, tensions began to emerge among the Maybourne investors. Quinlan informed them he had been told by Anglo Irish Bank, one of the group’s two lenders, that the debt could be moved into Nama. Coupled with growing concern among the hotels’ other shareholders that negative media speculation around Quinlan’s financial position could deter new investment, it created much antagonism in Maybourne’s boardroom. At a board meeting in November 2009, McKillen said Quinlan was “toxic” and the cause of the Maybourne hotels becoming associated with Nama.

Despite the tensions, the shareholders, who included the family of businessman Peter Green and Dublin stockbroker Kyran McLaughlin of Davy, had by 2010 accepted that the hotels required fresh capital and a new lender to stay out of the clutches of Nama.

Over the subsequent year, approaches, tentative expressions of interest and offers were made to one or more of the shareholders – ranging from £850 million to more than £1 billion. The main approaches came from the US private equity funds Westbrook and Northwood and from interests in the Middle East and Far East. Wynton, a sovereign wealth fund from Malaysia along with other investors from that country, were among those interested. The royal families of Qatar, Dubai and Abu Dhabi were also approached.

Others to express an interest were Singapore investors Raj and Kishin Kumar and the Kwee family, also from Singapore.

Some were more interested than others, although the Barclay brothers were ultimately the only party to write a cheque when they bought out the Greens’s 25 per cent shareholding in January 2011. Quinlan’s ultimate decision to side with the Barclays in October 2010 in the brothers’ stake-building led to battle lines being drawn with McKillen whose preferred investors were the Qataris.

Earlier, Quinlan had tried to smoke out investors from cash-rich Gulf states from 2009. Quinlan had beaten Prince Al-Waleed bin Talal, a member of the Saudi royal family, for the Savoy Hotel Group in 2004 and later sold the Savoy to him.

Quinlan’s trip to Abu Dhabi in September 2009 with his financial adviser, Irish ex-banker Gerry Murphy, showed the doors the high-profile businessman could open. The two men were met at the aircraft by a Rolls Royce and accommodated at the Emirates Palace Hotel, courtesy of Sheikh Nahyan, an Abu Dhabi government minister. Quinlan had hoped to find buyers for the Santander building, the exclusive Glebe development site in Chelsea, London, and his stake in the hotels, but no investment materialised from this trip.

On another trip to the Middle East in May-June 2010, Quinlan and Murphy met Sheikh Jassim, the son of the prime minister of Qatar and a principal in its state fund, Al Mirqab, to see if it wanted to buy any of the assets. The two even discussed with the head of Qatar’s investment bank QInvest the possibility of creating a bond that complied with sharia law to refinance the debt on Quinlan’s Santander building in Spain. Again, no investment arose as a result of this trip.

The McKillen-Barclay brothers case has shown how Quinlan developed a close relationship with the Barclay brothers in meetings on verandas and in villas, restaurants and top hotels in Monaco, Sardinia and the Swiss resort of Gstaad.

Meanwhile, McKillen was making both his own approaches and others with Quinlan and the Barclays to the Qatar royals.

Last Friday McKillen and the Qataris agreed – after intense talks – a deal where the businessman, if he can overturn the Barclays’ stakebuilding in the hotel in his case, could see his Maybourne stake rise from 36 to 50 per cent. This would make the Belfast-born businessman an equal-share partner with some of the globe’s richest investors in the hotels.

Such a scenario would see his former partner Quinlan sell out of the trophy assets he acquired in an Irish deal of a lifetime and further reduce his massive debt pile.