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Property developer Michael O’Flynn at the High Court

Property developer Michael O’Flynn appeared on Today with Sean O’Rourke (presented by Kellin Shanley) earlier.

Yesterday, the High Court ruled Carbon Finance, a subsidiary of US investment giant Blackstone, was not entitled to appoint receivers over companies in the O’Flynn Group. The interim examiner has also been removed.

Justice Mary Irvine said Carbon Finance did not disclose, fully, all the relevant information when it appointed an interim examiner; she also said the company “did not act in the utmost good faith”. NAMA was in possession of €1.8 bn euro of O’Flynn’s loans, and sold them to Blackstone for the price of €1.1bn.

Michael O’Flynn: “I never made a secret of the fact that I would like to get out of NAMA because NAMA wasn’t exactly in the development business. NAMA was a structure set up to deal with taking loans off the banks. And we were willing participants in a loan sale process, even though a loan sale doesn’t happen by us. Because that’s something we’re outside the room from. NAMA sold our loans…under a sale process…”

Keelin Shanley: “But you were supported…”

O’Flynn: “Yes, they sold the loans under a sale process to the eventual winners which were Blackstone. Yes, I was supported, as I have been on all aspects of our interactions with NAMA from the outset.”

Shanley: “Right. And when your loans were then sold to Blackstone and at that point you had to begin to try and work with Blackstone, what happened then?”

O’Flynn: “Well, essentially, Blackstone were our new lender and we set out to engage with Blackstone, as anyone would, with their lender. Unfortunately, it became very evident, very quickly, that Blackstone’s interpretation of the loan documents that we agreed with NAMA were quite different to our interpretation or indeed to our, to how the documents were implemented by NAMA and ourselves. That led to a lot of correspondence which…”

Shanley: “Just clarify that for me, Michael. In what way was Blackstone’s interpretation of the loan agreements different to yours? Or to what you say were NAMA’s interpretations. Like what was the problem? What did they want that you didn’t want?”

O’Flynn: “It’s a very complicated answer but I’ll just try and give you a very rough outline. Essentially, we restructured our loans with NAMA. We did it in such a way that, because we had some businesses in other parts of the UK and Europe, that we could essentially pay interest and pay loans from one company to another. So, in giving NAMA quite significant concessions, we did it on the basis that we could service interest and pay off loans across the whole group. That was a key element of us agreeing to the restructuring and that was immediately queried by Blackstone which led to quite a disagreement between us which we were hoping could be resolved amicably, even though at one point we suggested perhaps we needed to go to the courts to get a declaratory order to see who’s right, because of the two different interpretations.”

Shanley: “Ok, so Blackstone basically were saying that you couldn’t service your loans from companies right across your group. Why were they saying that? What were the implications of you not being able to do that? Did it mean that they would get control?”

O’Flynn: “You would have to ask Blackstone some of those questions but essentially they were, we would not have restructured, like if we couldn’t, if we cross-guaranteed, if we couldn’t cross-sell or cross-service. Otherwise, why would I do that? And I think that became the kernel of the problem because that would mean if we couldn’t cross-service, we would get into default very quickly and when we restructured our situation with NAMA, we were very conscious that we remained in NAMA until 2017, 2018 or however long NAMA is going to last. Or we could have been sold to anyone else. We were also conscious of that. So we were very careful to make sure that whatever arrangement we came to was one that we could implement, that we could survive as a group, that we could pay our bills, and do what us, as responsible directors, should do in a very, very difficult time for our industry.”

Shanley: “Ok, so the core of it there seems that Blackstone were saying that you couldn’t cross-structure your loans across the whole group, you knew that you were heading for default, if they didn’t allow this to continue. So what happened on the day that they came to you in July, looking for you to repay your personal loans?”

O’Flynn: “Well, essentially, there was much debate between us, very shortly after the loans transferred, as to the proper construction or interpretation of the documents we had agreed with NAMA. And we had met, e had many discussions, engagement by correspondence. So, basically, what happened on the day, to my absolute shock and bewilderment, they decided to call in my personal loans. And the reason, I have no personal guarantees and neither has my brother John but, by calling in my personal loans, they, and they openly said this in court, they set about to engineer a default which would allow them to have a default across the company loans. And the reason that connection was because of share charges, which we gave at the restructuring, we couldn’t have an event of default on either of our personal situation. Now we contend we should never have been in NAMA personally because the type of loans we had didn’t qualify, we didn’t take a judicial review at the time, we took the big picture and decided to go with it.”

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(Sasko Lazarov/Photocall ireland)

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The 17-storey Elysian Tower in Cork built by the O’Flynn Construction Group and opened in September 2008. It’s the country’s tallest building – 11 metres taller than Dublin’s Liberty Hall. It consists of 211 ‘luxury apartments’, including 37 penthouse apartments, and retail, restaurant, gym and creche facilities.

It’s being reported that the loans associated with Michael O’Flynn, of the O’Flynn Construction Group, are being sold by Nama to global investment firm Blackstone Real Estate.

The Irish Times reports:

In the absence of any information to the contrary, the taxpayers can only conclude that they have given Mr O’Flynn a very large bailout. As far as we know, Mr O’Flynn owed his banks €1.8 billion when he went into Nama in 2009 and has now left Nama owing Blackstone considerably less money – the figure of €1.1 billion being reported.

Mr O’Flynn remains, subject to contradiction by Nama, in control of his company; he just has new bankers. However, some €700 million has been wiped off his debts and sucked up by the taxpayer in one of two ways depending where the writedown took place.

If the writedown occurred when Mr O’Flynn’s loans originally transferred into Nama, the tax payer took the hit in the subsequent recapitalisation capital of the banks. If the writedown occurred when Nama sold the loans on to Blackstone, which is unlikely, the taxpayer has funded it through Nama.

O’Flynn, Blackstone case shows need for Nama openness (Irish Times)

Related: How US “vulture capitalist”, the Blackstone group is insinuating itself into the fabric of Irish state-business (Namawinelake)

Pic: Wikipedia