High Court settlement against Treasury Holdings to realise €46m

A High Court judge has approved a complex settlement of an action brought by Nama and others against Treasury Holdings' co-founders Richard Barrett and John Ronan over a controversial €20 million transaction, known as the TAIL transaction, involving the alleged transfer of shares out of the group at a significant undervalue.

The settlement will realise a minimum of €46 million for the liquidator and the unsecured creditors of Treasury, of whom the largest are Nama - owed €1 billion - and KCB Bank, Mr Justice Peter Kelly noted.

Mr Barrett will benefit by about €4 million net cash under the settlement while Mr Ronan will benefit by about €3 million arising from a distribution to him from the winding up of the TAIL (Treasury Asian Investments Ltd) shareholding under the settlement. Mr Ronan holds 25 per cent of TAIL.

While the court was always concerned when defendants against whom serious allegations are made were not walking away empty handed, this settlement was in the best interests of the liquidation and was both legally and commercially justified, the judge said.

While he would prefer the defendants were not benefitting, the liquidator had had to involve them in the totality of the settlement, he added. Mr Barrett appeared to have been involved in negotiating elements of the deal and the legal costs of the defendants would also be met by themselves, he also noted.

The judge today granted the application by Rossa Fanning, for Treasury’s joint liquidators, to sanction the settlement having earlier secured clarification of various issues from Michael McAteer, one of the joint liquidators appointed after Treasury was wound up in 2011 with debts of €2.7billion.

Mr McAteer played a key role in negotiating the settlement involving trips to Shanghai and Singapore. Declan Murphy, for Nama, said it supported the settlement.

Had the case gone to trial and the plaintiffs won, they would have then had to unwind the TAIL transaction and sell shares in another jurisdiction with all the risks that carried, the judge noted. The settlement also addressed another controversial transaction, the €2.26 million Manco transaction, which was not subject of this litigation.

Although he considered there was only a small risk of losing the case had it gone to trial as scheduled in October, the judge said he was told even victory at trial would not realise as much as under this settlement.

Mr McAteer had also said the fact of the litigation would create uncertainty around the value of the shares involved. Under the settlement, the shares were valued at 2.98 Singaporean dollars despite currently trading at between 1.60-1.70 Singaporean dollars and the settlement involved the liquidation getting 60 per cent of the 2.98 value.

Mr Justice Kelly was asked last Friday to approve the settlement but he raised concerns about aspects of it and deferred his decision.

The liquidators, the company and Nama were all plaintiffs in the action against Mr Ronan and Mr Barrett over the TAIL transaction of March 22nd, 2010, where €20 million shares were allegedly transferred out of the group to the benefit of Mr Barrett and Mr Ronan for €100,000 and unsecured loan notes.

Treasury was initially also a defendant but, after it was wound up, became a plaintiff on the application of the liquidators who concluded there was a bona fide case for unwinding the TAIL transaction. The plaintiffs claimed there was no commercially valid reason for the TAIL transaction, made when Treasury was either insolvent or in very difficult financial circumstances.

The settlement also addresses the Manco transaction, alleged by Mr McAteer to be linked to the TAIL transaction. It is claimed Manco was carried out on August 24th 2012, immediately before the winding up petition was presented for Treasury.

The TAIL transaction involved transfer of €20 million shares in China Real Estate Opportunities (CREO) by three Treasury subsidiaries into another wholly owner Treasury subsidiary, Daylasian, for unsecured ten year loan notes with a face value of some €18.4 million.

The plaintiffs claimed the economic effect of that transaction alone on Treasury was neutral but alleged, on the same date, the defendants caused Treasury to transfer its interest in Daylasian to Mr Barrett and Mr Ronan for €100,000 leaving Treasury with an unsecured loan note instrument from what was no longer a group company.

The defendants denied the claims. They argued the rationale for the transaction arose from a decision by the CREO plc board to relist the company on the Signapore Stock Exchange as a business trust. The loan notes were an asset of Treasury held in the expectation they would be paid in full, they pleaded.