Attorney General Paul Gallagher has told the High Court that property investor Paddy McKillen has total loan exposure of €2.1 billion to institutions participating in the National Assets Management Agency and has admitted he is unable to repay certain loans which have expired.
It was "an inescapable fact" those loans were impaired and non-performing, Mr Gallagher said.
Mr McKillen has not given a date when he can pay the €2.1 billion and one did not need to be an expert to see the risk involved, Mr Gallagher said. NAMA could not be held up because Mr McKillen wanted a "reasonable" time to try and secure refinancing which he had so far failed to obtain.
As a matter of law, Mr McKillen had to repay loans which had expired and on his own testimony he could not, Mr Gallagher said.
"What else is that but impaired?" The fact there was "forbearance" by banks towards Mr McKillen was not relevant, as banks had not wanted to write on their balance sheets that loans were impaired, Mr Gallagher added.
It was "quite amazing" experts for Mr McKillen did not address these matters in their evidence.
The Attorney, who drafted the 250-Section Nama Act 2009, was continuing submissions for the State in opposing the action by Mr McKillen aimed at preventing the transfer of his loans to Nama.
The case relates to Mr McKillen's Bank of Ireland loans — which he estimates at €211 million but Nama puts at €297 million — but the outcome has implications for Mr McKillen's entire €2.1 billion loans with the five participating institutions in NAMA. That portfolio includes €800 million loans with Anglo Irish Bank.
Mr Gallagher completed a forensic analysis of Sections of the Nama Act and then addressed a range of matters in affidavits for both sides, including testimony from experts for Mr McKillen his loans were performing loans and should not be acquired by NAMA.
The Attorney said it was "of very serious concern" there was non-disclosure "of a material kind" by Mr McKillen of matters about his borrowings and loans when he initiated his challenge to the takeover of his loans by Nama. Even before Nama came into being, some of Mr McKillen's loans had expired, he said.
The "elephant in the room" was that, while his experts were saying Mr McKillen was a good borrower with just "technical defects" in some loans, if a loan had expired, there was an obligation to repay and that had not been done.
Mr McKillen also initially said none of his loans were development loans when that was not the case. He had also failed to disclose breaches of loan covenants and that he had not secured refinancing for a number of loans.
After Nama pointed out these matters, Mr McKillen had asserted in a second affidvait that loans often reached their expiry date and were extended by agreement with the banks before or after expiry, Mr Gallagher said.
Mr McKillen had said it would be "contrary to good banking business" to "simply call in a perfoming loan" because of a "temporary loan to value issue" or because the loan had reached maturity. Any bank that would call in such loans "would certainly cause businessmen like myself to question whether such a bank would be a good business partner in both the short and long term", Mr McKillen said.
Mr McKillen and his experts argued calling in such loans was contrary to "established practices" of the banks but what they failed to recognise was such practises "have no place now", the Attorney said.
The situation was no principal payments were being made on most of Mr McKillen's loans while some other loans exceeded their loan to value ratio.
The case continues on Tuesday before a three judge court comprising High Court President, Mr Justice Nicholas Kearns, Mr Justice Peter Kelly and Mr Justice Frank Clarke.