The Treasury Holdings Group of companies is insolvent and past the point of commercial rescue, according to the National Asset Management Agency.
NAMA says the appointment of receivers to some of Treasury's assets is more likely to lead to a better financial return for the State than continuing to fund the group.
The agency made the claims in its response to a challenge by Treasury to its decision to demand repayment of around €1 billion worth of loans and to appoint receivers.
Treasury claims NAMA's decision is irrational, disproportionate and an unfair exercise of its powers.
In sworn documents submitted by NAMA, the agency's Senior Portfolio Manager Mary Birmingham says that Treasury has overlooked the commercial reality that the loan facilities which have been called in are in default and in many cases have been for some time.
NAMA says it has supported the ongoing functioning of the Treasury group and has provided it with just over €100m in funding over the past two years. It says Treasury can not fund itself.
NAMA says the agency acquired €1.7 billion of loans from Treasury. It says the majority of these are in default. It says Treasury also has very significant non-NAMA debt of around €1 billion.
NAMA also says that at a time when Treasury was aware most of its loans would be transferred to NAMA, a transfer of €20m of shares from a Treasury company to the benefit of Treasury founders, Richard Barrett and Johnny Ronan, was authorised.
NAMA wants this transaction reversed. It says the clear effect of this transaction was to diminish the assets available to Treasury's creditors - including NAMA.
NAMA says proposals made by two companies - Macquarie and Hines - to acquire the disputed loans are predicated on NAMA providing finance to the companies to acquire the debt and would involve ongoing involvement by Treasury and its shareholders.
In return, NAMA says it would get a relatively small upfront cash payment and would not have first call on the loans.
Under the proposal from Australian group Macquarie, NAMA says Treasury's shareholders and management would receive €80m as well as a management fee of €6m a year over seven years.
NAMA says it rejected both the offers following a detailed evaluation. It says it decided to call in the loans on the basis that this would offer a better commercial financial outcome than the offers.
NAMA also says Treasury has taken these court proceedings in breach of a clear and unequivocal agreement entered into by both sides that Treasury would not challenge the appointment of receivers if it was given a 14-day standstill period.
NAMA says it is perhaps inevitable that debtors will have difficulty in accepting that their businesses have finally failed or will seek to contend that more time will lead to a road back to recovery. But it says it has to take decisions in the light of its mandate.
Barrett accuses NAMA of "improper behaviour"
Group managing director of Treasury Holdings, Richard Barrett, claimed the way NAMA terminated negotiations with investors and Treasury flew in the face of NAMA's own code of conduct and was improper behaviour for a public body.
He said he would have expected respect and willingness to proceed and negotiate in a straightforward fashion, given Treasury's "impeccable behaviour" towards the agency, its early support and encouragement and his refusal to help disgruntled NAMA debtors. Regrettably, he said, NAMA did not appear to see matters that way.
Mr Barrett said the appointment of receivers to Treasury Group companies had already caused severe damage. He said that by moving quickly to bring this challenge, he believed Treasury had managed to retain value in the businesses for the moment.
But he said that if Treasury did not get the injunctions it sought, he believed the group would suffer a loss that could not be compensated in damages, and a grave and serious injustice would be caused.
Mr Barrett also said NAMA's actions also threatened the activities of Treasury's business in China - Treasury China Trust - which has assets of around €1.5 billion.
