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Former 1990s high-flying merchant banker Bill Birnie was once thought of as one of this country’s moneymen who made the world go around.
The boyishly dynamic chairman and managing partner of Birnie Capital Partners was a businessman who knew a good deal when he saw one.
Following his corporate dealmaking days at Fay Richwhite, and later Birnie Capital, he branched into a range of different ventures including property development and pharmaceutical life sciences.
But his fortune, last year estimated at $100 million, now appears to have crumbled, leaving Mr Birnie at the complete mercy of his bankers.
Severe financial pressure
According to previously suppressed affidavits presented to the High Court this week, Mr Birnie’s financial circumstances and those of his associated businesses, are under severe financial pressure.
The affidavits of Mr Birnie and his associate Stephen Norrie cast doubt on his ability to meet all or even part of a $19 million repayment should he lose a derivative action application heard in court this week.
Mr Birnie and his associated interests were responding to a civil case brought by two shareholders of Birne Capital Property Partnership (BCPP), an investment vehicle for several large-scale property developments in Northland.
The two plaintiffs – Auckland businessman Allen Peters of Peters Capital and Bernard Quinn, representing Ngati Awa Asset Holdings – claimed Mr Birnie and Mr Norrie breached fiduciary duty by voting against the exercise of a put option that would force the return of $19 million to BCPP.
The property assets include the purchase of Lion Rock Golf Course and Lion Rock Development, which last year gained consent to develop an international standard 18-hole golf course and residential development in the Bay of Islands.
Mr Birnie and his interests received $21.5 million in cash and were issued 16 million shares in BCPP. The other investor shareholders in BCPP fronted up with $17.25 million while BCPP borrowed a further $6.5 million from BNZ to pay for six properties on Kawau Island.
The agreement contained an option for BCPP to transfer back the Lion Rock assets if a further conditional agreement between John Paterson & Co and Mr Birnie for the sale and purchase of certain land didn't eventuate.
In September 2009, Paterson & Co cancelled that agreement. At about the same time a valuation report on Lion Rock development considered the development of the Lion Rock would require an additional investment estimated at between $61 million and $70.115 million plus GST.
A key part of the defence argument was that Mr Birnie’s financial position is such that the proceedings are pointless.
Michael Reed, QC, argued that the money could not be recovered and thus there was no likelihood of success.
While no statements of Mr Birnie’s assets and liabilities were presented to the court the affidavits suggest Mr Birnie and the Lion Rock vendors Paoneone Settlement Trust Number 5 and Picasso Nominees, both Birnie-related companies, were unable to stump up with the money, should the plaintiffs win their case.
BCCP has just $530,000 in the bank and technically that belongs to the BNZ, which has a general security agreement over a $6.5 million mortgage on one of the property deals.
Mr Reed also argued that BCPP, whose investors include South Canterbury Finance founder Allan Hubbard and his wife Margaret, could finance the Lion Rock development to completion, meaning there was no need for the put option and subsequent need to refund the $19 million.
A good or bad deal?
Counsel for the plaintiffs Zane Kennedy argued that that was unrealistic.
Taking into account interest costs on top of the cost of the land and the developoment of the golf course, the total outlay would be $116 million plus the $19 million already invested, Mr Kennedy said.
The estimated post development value has been estimated at $100 million.
Justice Raynor Asher has reserved his decision on the case, while lifting a suppression order banning the media from publishing details of the case.