Former Treasury Holdings Directors Settling Dispute with Irish Government

According to a report yesterday in the Irish Independent newspaper, former Treasury Holdings and Forterra directors Richard Barrett and Johnny Ronan are close to settling their dispute with the Irish government over a controversial sale of the investment fund’s China real estate assets.

The Independent’s story reveals that Barrett and Ronan have reached an agreement to make payment of up to Euros 100 million to NAMA, the Irish government’s “bad asset” bank, and the court-appointed liquidators of Treasury Holdings. In return for this payment, the pair, who were once among Ireland’s most renowned real estate speculators, would receive nearly Euros 5 million each.

However, the proposed settlement still needs to be approved by Irish bankruptcy courts, and the judge hearing the case appears to have a few ideas to share on the proposed payments to Barrett and Ronan under the deal. “That’s “a lot of money for someone against whom there is an allegation of fraud”, the Independent quoted Judge Peter Kelly as saying when the proposed settlement came before his court last week.

In the proposed settlement, Euros 4.8 million of the Euros 5 million to be paid to Barrett was structured as a “success fee” related to the sale of Forterra’s China-based holdings. While still unclear, Ronan is expected to be offered a similar sum as part of the deal.

Coming soon after Barrett and Ronan announced the sale of their stake in Forterra Trust and the related management company to Hong Kong developer Nan Fung last week, it appears that the erstwhile Treasury directors are using the proceeds from that transaction to fund the settlement of their ongoing court case with NAMA and the liquidators of Treasury Holdings.

The sale of Forterra to Nan Fung amounted to US$184 million which would be equivalent to more than Euros 138 million. There has been no mention to date of the disposition of the Euros 38 million difference between the proceeds of the sale of Forterra to Nan Fung and the Euros 100 million payment that Barrett and Ronan are expected to make to NAMA and the liquidators.

Another financial element which appears to be missing from the settlement is the US$267 million that Forterra reportedly received from the Carlyle Group earlier this year, while it was under the control of Barrett and Ronan, for the sale of the Central Plaza building in Shanghai.

Forterra, which held the assets which had formerly made up the holdings of Treasury China Trust, had been split off from Treasury Holdings last year when Barrett and Ronan had sold themselves the controlling interest in Treasury China Trust and its associated management company. The sale of these companies at what appeared to have been priced at as much as a 93 percent discount over other valuations led to lawsuits and accusations of fraud from Treasury Holdings shareholders and creditors.

The disputed transaction occurred shortly before Treasury Holdings went bankrupt following a series of aggressive acquisitions of real estate assets in the UK, and it is the court case arising from this dispute that Barrett and Ronan are now attempting to settle.

While this settlement may appear to be a case of management commandeering assets from their own company, selling them to a third party, giving back some of the money to the original owners of the company, and then asking for a commission on the deal, it’s possible that the situation could be more complex than that.