The National Asset Management Agency will not now be acquiring the loans investor Paddy McKillen has with banks who are participating in the agency.

A spokesperson for Mr McKillen said he received a letter to that effect this morning. NAMA later cconfirmed the decision. The loans are understood to be worth almost €1.5 billion.

Mr McKillen challenged NAMA's acquisition of his loans and won his case on appeal to the Supreme Court. That court found that the decision to acquire his loans was made before the agency was officially established, and that Mr McKillen should have been given an opportunity to make representations to NAMA before it took a decision to acquire his loans.

In the High Court, NAMA had argued that Mr McKillen's loans - which it valued at €2.1 billion last year - posed a systemic risk to the financial stability of the State.

This morning, the Supreme Court has awarded Mr McKillen all the costs of his legal action against the State. The costs of the proceedings taken by Mr McKillen in the High Court and in the Supreme Court, which must now be paid by the State, are being estimated at between €5m and €7m.

A spokesperson for NAMA said its decision was taken on the basis of the current, rather than the historical, state of the loan portfolio.

'The decision of the board not to acquire reflects the fact that the composition of the loans under consideration changed substantially. The land and development exposure declined significantly since December 2009 and the loans were no longer deemed material in the way they had been in December 2009,' the spokesperson said.

In a statement, Paddy McKillen said he and his companies were delighted with NAMA's decision. He said they had always maintained that their property investments in prime commercial property and high-end retail shopping centres were not the type of risky loans NAMA was established to deal with.