Wednesday December 11, 2019

The cinema mogul, the nightspot and the €67.5m judgment

The plan was to make a quick killing on a prime Dublin pub. But things soon went wrong for Tom Anderson and his investment partners

9th June, 2019
2
Tom Anderson

A bitter row over a disastrous property deal led to a massive €67.52 million judgment being registered against cinema magnate Tom Anderson earlier this year, which he is now disputing.

Anderson was in the High Court last month seeking to have the judgment, obtained in favour of architect and pub investor Paul Clinton, set aside.

The court heard that the falling out relates to an ill-fated deal to buy Flannery’s, a busy pub on Dublin’s Camden Street in the city centre.

A member of the Omniplex cinema dynasty, Anderson, along with radio industry investor Mike Ormonde, publican Colin Dolan and Dawn Maye (whose father was the late developer Liam Maye), borrowed €14 million in a highly leveraged debt arrangement in 2008 to buy the pub and adjoining properties.

They hoped it would be a lucrative transaction that, despite being funded with 100 per cent debt, would quickly pay for itself. The plan was to develop lands attached to the pub and bag a big return that would also pay off the debt. Things, however, swiftly fell apart.

The tale has a connection with another deal-gone-wrong for the four investors, the attempt to acquire John Reynolds’s POD nightclub.

It began in November 2008, when Anderson, Ormonde, Dolan and Maye (whose husband is Ian Redmond, a longtime business partner of the other three) took out a mortgage with Bank of Scotland for 80 per cent of the €14 million needed to acquire Flannery’s.

The consortium needed the remaining 20 per cent, and Clinton, whose interests include Cassidy’s Bar, the Button Factory venue and the Lafayette building, was approached to lend this €2.8 million sum in the form of a short-term mezzanine loan.

Instead of offering Clinton a portion of equity in return for the loan, the consortium offered him a high interest rate return of 33 per cent per annum. There was also a further default penalty rate of 10 per cent included in the loan agreement signed by all the parties, bringing the rate to 43 per cent.

Had the loan been paid in the agreed time period it would have amounted to a sum of €6.57 million at most. The interest rate was set by the borrowers, Clinton told the court, and the agreement was arranged by Anderson and the business partners’ solicitor at the time.

The deal was supposed to be so lucrative that the business partners could afford to pay Clinton the 33 per cent interest, the court heard.

At the time, Flannery’s had a circa €5 million a year turnover. Anderson and his business partners took the view that the bar’s annual profit of €1.5 million would easily service the €1.26 million interest on the entire debt.

But the loan from Clinton, due for repayment by 2011, was not repaid and the whopping interest rate caused the debt to rocket.

Meanwhile, as the economy deteriorated, Dawn Maye would enter bankruptcy, while Colin Dolan was indemnified against the debt by the other partners in 2014.

At this stage, the consortium sought to acquire the lease to the POD nightclub, the plan being to amalgamate the Flannery’s and POD operations and use the POD’s €7 million annual trading profits to help fund the repayment of the debt.

Flannery’s, the Camden Street pub at the centre of the case Fergal Phillips

However, the POD deal fell apart after a court dispute ended with a ruling in favour of owner John Reynolds.

The two companies associated with it and the Flannery’s deal went into examinership. Clinton then bought these companies out of examinership in 2014 and now owns Flannery’s.

Attempts to resolve the debt issue also failed. According to Clinton, a breakdown of relations between the borrowers contributed to delays in addressing the debt.

After attempts to settle the debt, in 2017 Clinton initiated court proceedings against Anderson.

Clinton alleges that he personally served Anderson the summons in August 2017 at the Hampton Hotel in Donnybrook and produced an affidavit from a witness, businessman Paul McNulty.

John Reynolds’s solicitor, John B O’Connor, also supplied an affidavit confirming that he had prepared a draft affidavit which Reynolds amended and approved, stating that he had witnessed Anderson being served by Clinton.

A copy of this was given to the court. Reynolds died last year before signing it.

Anderson says he did meet Clinton in the Hampton Hotel and they “exchanged pleasantries”, but he denies that he was served the summons and is relying on the claim that he was not aware of the proceedings as well as the claim that the case is statute barred, to attempt to have the judgment overturned.

He also alleges the action is unenforceable because Clinton failed to bring proceedings against Anderson’s co-borrowers.

Clinton told the court the reason he had not sued the other borrowers was because: “Mr Anderson was always described as the moneyman among the borrowers, which was why he had been given 25 per cent of their proposed development for free despite having nothing to do with the original concept, and as far as I am aware the other borrowers would not have had the substance for the sum claimed.”

He maintained that Anderson was fully aware of the proceedings and even sought to meet Clinton to discuss them after the alleged serving of the summons.

The pair both agree that they did meet more than ten times to try to resolve the matter.

In May last year, Clinton went to the High Court and was granted a judgment in default of appearance of €67.52 million – the amount claimed to be owed on that original €6.57 million loan with interest rolled in.

The following month, he sent a registered letter to Anderson’s home address with a copy of the judgment.

Judge Meenan questioned the huge amount of the judgment in the context of the relatively small original loan amount. Clinton argued that he was invited to provide high-risk mezzanine funding for the consortium to buy property that he would have no security over.

“I had never loaned money for a commercial venture before,” he said. “The main reason I decided to go ahead was when it was confirmed Mr Anderson was on board, providing the financial muscle to guarantee the development funding, as his family were listed in Ireland’s ‘Top 100 Rich List’.”

Clinton hoped the matter might be resolved when Anderson, a senior member of the cinema-owning dynasty of that name, sold five cinemas in Britain for €109 million in 2016. But it was not to be.

Anderson told the court that if the judgment was allowed to stand it would have “a potentially catastrophic effect on my business interests and leave me contemplating bankruptcy”.

When contacted, Anderson said he could not comment as there was a confidential process going on. Clinton also declined to comment while the case is ongoing.

The case is adjourned until later this month to allow for possible settlement negotiations between the two parties.

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