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The Strange Tale Of The Real Estate Billionaire, The Sanctions And The £17M Debt To The Libyan Investment Authority

How does an investor that bought £4B of office buildings and shopping centres end up being pursued in court by the investment arm of one of the world’s most dysfunctional countries?

That is the situation facing Glenn Maud, the lawyer-turned-investor from Sheffield who counts the Libyan Investment Authority as one of the parties petitioning for his bankruptcy to have debts repaid.

The Strange Tale Of The Real Estate Billionaire, The Sanctions And The £17M Debt To The Libyan Investment Authority
Muammar Gaddafi

Earlier this month a U.K. judge deferred the request from creditors including the Libyan Investment Authority and a company linked to entrepreneur Robert Tchenguiz. A company owned by Maud’s estranged wife is owed €65M, but is arguing that the request for bankruptcy should not go ahead. 

The tale of how this situation came to pass is as strange as any you will find in modern property. To understand this situation, you have to scroll back to a tent in Libya in 2004. For decades, Libyan leader Muammar Gaddafi was branded a terrorist and a lunatic and lived in exile. But following a meeting with U.K. Prime Minister Tony Blair, sanctions against Libya were dropped in 2004, and the country took its first steps back into international finance markets. The main pillar of this was the creation of the Libyan Investment Authority, a sovereign wealth fund set up to invest surplus cash from the country’s oil reserves. Investment potential: $60B. 

The LIA appointed Goldman Sachs to advise it on its investment strategy, and up until 2008, all was going swimmingly. The LIA was on the lookout for deals in real estate, and Goldman introduced the fund to U.K. entrepreneur Glenn Maud.

Maud was one of the investors who epitomised the pre-2007 cycle, using knowledge of financial engineering built up during his time as a property lawyer to pull off a string of highly leveraged deals including buying Citi’s London HQ for £1B, a portfolio of shopping centres called Gemini that were valued at £1.2B and, in his largest and most complex deal, the Madrid HQ of Spanish bank Santander for €1.9B.

The deal, a joint venture with Irish investor Derek Quinlan, included just €25M of the duo's own money.

In April 2008 after the introduction from Goldman, the LIA lent Maud’s company, Propinvest Group, €12.5M, court documents show, to invest in either the Santander deal or any other opportunities that the entrepreneur might come across. The loan contained a personal guarantee from Maud, meaning that if Propinvest Group defaulted, he could be personally pursued for the balance.

If things had played out as the participants hoped, that might have been the end of the matter, and this insight into the inner workings of high finance might never have come to light. But from autumn 2008 things took a turn for the worse for Maud, the LIA and global finance in general, and the story of the €12.5M loan got even more complex.

Goldman Sachs office

The deal to buy the Santander HQ completed on 16 September 2008 — the day after Lehman Brothers went into bankruptcy. In the ensuing turmoil, the LIA lost around $1.2B that it had invested in financial derivatives via Goldman, with a big chunk of this investment a bet that bank share prices would recover. The LIA sued Goldman, saying it had not understood the deal it entered into, but ultimately lost its case in 2016.

For Maud, the highly leveraged nature of his investments meant that from late 2008 he has been battling to restructure his debts and keep control of his assets. The Citi Tower in London was sold for £1.1B in 2013, booking a profit, and the Santander HQ is on the verge of a sale for €2.7B, slightly more than the debt secured against it.

But the Gemini portfolio went into administration and was sold for just £350M, in spite of having more than £850M of debt secured against it, although Propinvest and Maud had already taken much of the equity out of the deal via a 2006 refinancing.

Propinvest Group, the company to which the LIA had lent the €12.5M, went into administration in 2011 after Norwegian lender DnB Norbank called in a €200M loan against a Nordic portfolio which was in default. And that left Maud liable for the money under the personal guarantee.

At around the same time, Libya’s problems were extending far beyond financial markets. The country descended into civil war in 2011, a war which saw Gaddafi overthrown and killed in bloody and public fashion. UN sanctions were reimposed on the country, and the assets of the LIA, estimated at $67B, were frozen.

A second civil war began in 2014, and today Libya remains in turmoil, with two separate factions claiming to govern the country — and each also claiming to run the LIA and the asset base it controls.

In February 2014, the LIA came knocking for its money from Maud, which with interest had risen to £17.6M, documents from the U.K. Commercial Court show. It served a statutory demand in the U.K. courts that Maud be made bankrupt so its money could be repaid.

The Strange Tale Of The Real Estate Billionaire, The Sanctions And The £17M Debt To The Libyan Investment Authority
Santander's Madrid HQ

But in 2015 a judge found in favour of Maud, who had put forward an innovative defence: He argued that making the payment would put him in breech of EU sanctions against Libya and the asset freezing order to which the LIA is subject.

In 2016 the Court of Appeal overturned this judgement, arguing that the U.K. Treasury might have given Maud permission to repay the debt, but he hadn’t tried. The sanctions alone weren’t enough to mean repayment didn’t have to be made.

But earlier this month there was a stay of execution, relating to the sale of the Santander HQ. And the tables have turned somewhat between Maud and some of his creditors.

Maud has said he will repay the sums owed to him if the bankruptcy petition is deferred, as this will allow him to complete the sale of the Santander HQ in Madrid. He argued in a court case in 2015 that if this is completed he will be in line to recoup up to €75M.

On 11 June a judge in the case ruled that the bankruptcy should be deferred to see if he can get the sale over the line. Creditors that had originally petitioned for his bankruptcy are owed a total of  €220M. They include a company owned by his estranged wife, which is owed €65M, but court documents show this company is now agreeing the company shouldn't be made bankrupt so it can sell the building.

The documents say that the LIA wants the bankruptcy to proceed — it is fed up with waiting for its money back. Also pushing for bankruptcy is a company controlled by Robert Tchenguiz, who, having bought various personal loans to Maud and junior loans secured against the Santander HQ, will have a shot at taking control of the building if Maud is declared bankrupt.

The tale is far from over. Even in ruling against him in 2016, the appeal court judges admitted they had no idea to whom the debt should be repaid, with two different political regimes claiming to control the LIA. Law firm Hogan Lovells acted for the LIA, but the presiding judge said he could not be sure on whose authority the firm was acting.

When Libya entered financial markets in 2006, both it and the people it invested with thought there were rich pickings to be had. Little did all involved know that debts would still be argued over more than a decade later.