The National Assets Management Agency (Nama) has decided not to acquire some €1.5 billion loans of companies of property investor Paddy McKillen, it has emerged.
Lawyers for Mr McKillen said today they had received a letter from Nama stating it no longer proposed to acquire the loans, which were at the centre of a legal battle between Mr McKillen and Nama.
The development came just before the Supreme Court awarded legal costs, estimated at several million, to Mr McKillen against Nama of his successful challenge to the proposed acquisition of loans of about €200 million with Bank of Ireland.
Last February, the Supreme Court allowed Mr McKillen's appeal against the proposed acquisition after upholding arguments by him that Nama had never made any lawful decision to acquire the loans.
The court deferred its decision on other issues and, in a further judgment last April, unanimously rejected Mr McKillen's challenge to the constitutionality of provisions of the Nama Act 2009 defining the "eligible" bank assets the agency may acquire. It upheld his claim he was entitled to an opportunity to make representations to Nama before it could decide whether or not to acquire the loans.
There was a real risk the property and contractual rights of Mr McKillen and his companies may be directly and adversely affected by any proposed loans acquisition, the court said.
While the State claimed acquisition was urgent because of the financial crisis and the loans represented a "systemic risk" to the stability of the financial system, Nama failed to act on its purported December 2009 decision to acquire the loans prior to Mr McKillen challenging that decision in summer 2010, the court noted.
It also criticised the "furtiveness" of the agency in dealing with Mr McKillen and its failure over months to confirm it had decided to acquire the loans
The Chief Justice, Mr Justice John Murray, stressed the court's decision on the right to be heard does not affect the fundamental functioning of the system established under the Nama Act but rather affects the procedures to be followed by Nama in considering whether to acquire eligible bank assets.
A spokesman for Nama said after the hearing that the Supreme Court ruling was "hugely significant".
He said the decision not to acquire the remaining loans was taken on the basis of the current rather than the historical composition of the loan portfolio.
According to Nama, the composition of the loans changed "substantially" as the land and development exposure "declined significantly since December 2009". The agency said the loans were no longer deemed material in the way they had been in December 2009.
"It is important to bear in mind that Nama successfully defended two of the four grounds on which Mr McKillen objected to the agency's original decision to acquire his loans; namely that the Nama Act was unconstitutional and that it breached State aid rules."
