FINANCIER NIALL McFadden is insolvent with potential liabilities of almost €100 million and is facing bankruptcy proceedings in the UK by his largest creditor, Anglo Irish Bank, it emerged at the Commercial Court yesterday.
The court also heard Mr McFadden secured an order from the English courts this week temporarily protecting him from creditors while he tries to negotiate an individual voluntary arrangement (IVA) under UK bankruptcy laws.
Under English law, Mr McFadden needs the support of 75 per cent (in value) of his creditors for an IVA to be binding.
His liabilities to Anglo amount to about €65 million, representing about 73 per cent of creditors, while he has valued his unencumbered assets at £500,000.
The IVA move came two days after the High Court here lifted an undertaking by Mr McFadden not to apply for bankruptcy either here or in the UK and less than a month before a bankruptcy petition brought by Anglo in the UK against Mr McFadden is due before the courts there.
The development also came on the eve of a hearing here where Mr McFadden was to be cross-examined about his assets by National Irish Bank as part of its effort to execute judgments of more than €15 million against him.
NIB secured a €6.3 million judgment in April 2010 arising from Mr McFadden’s personal guarantee over a bridging loan to acquire the Buy Sell classified ads business. In July, it secured judgment for €8.87 million against him and others arising from personal guarantees provided to a company of Paddy Kelly.
NIB had sought cross-examination about matters related to a statement of affairs provided last January by Mr McFadden.
An earlier cross-examination did not proceed after NIB reached an agreement with Mr McFadden last March. The bank renewed its application when that settlement could not be implemented as a result of Anglo bringing the bankruptcy petition in the UK (listed for June 21st).
John Hennessy SC, for NIB, told Mr Justice Peter Kelly that his side had been told hours earlier that Mr McFadden had secured an interim order at a hearing of the bankruptcy section of the High Court in London held on Wednesday.
This gives Mr McFadden 14 days of protection (which may be extended) from creditors while he tries to negotiate a composite arrangement with 75 per cent of creditors, counsel said.
Support from Anglo would ensure such an IVA could be negotiated, the court heard.
Denis McDonald SC, for Mr McFadden, sought an adjournment of the NIB application. Cross-examination was pointless as it appeared inevitable either an IVA or bankruptcy would proceed in England, he said.
The English court had accepted that Mr McFadden’s centre of main interests was in England and Anglo also accepted that, he added.
NIB opposed the adjournment.
Mr Justice Kelly ruled his discretion to proceed with the cross-examination was not fettered by the English order.
In cross-examination, Mr McFadden told Mr Hennessy he moved to London in September 2009 and he spends more than half his time there. His wife and three children live in Blackrock, Co Dublin.
He said is the sole employee of Boundary Advisory Services UK, a limited liability company set up in 2008, but has no written contract.
BASUK’s parent entity is an Isle of Man company, Boundary Equity Holdings.
Pressed by the judge on whether the structure of various Boundary companies between 2002 and 2007 and registered in Ireland, Britain and the Isle of Man was for tax-avoidance purposes, Mr McFadden said it was to “maximise returns for investors”.
The hearing continues today.
