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The second coming of Moralltach: the man, the plan and the money
John Kieran Brennan is undeterred by allegations of impropriety and a failed attempt to float his company on the stock exchange. Instead, the former Wexford property developer turned business mogul says the best is yet to come
- BARRY J WHYTE JULY 2, 2022
Bull and bear sculptures at the Frankfurt Stock Exchange in Frankfurt, Germany. John Kieran Brennan hopes to float his property fund Moralltach there. Picture: Ralph Orlowski/Bloomberg
John Kieran Brennan believes in second chances. That’s why he called his property fund Moralltach, the name of a famous sword from Irish mythology which had the power to bring a warrior who had died in battle back to life.
It seemed apt, he said, since the purpose of the company is to free hundreds of people from crushing Celtic Tiger-era debts — thus giving them a new lease of life.
Brennan wants to float the company on the stock exchange in Frankfurt, which he described as “the Valhalla of stock exchanges”, and use the cash raised, both by issuing shares and raising other finance, to develop projects that he believes can wipe away the debts held by property owners in financial difficulty.
“We help you fight the banks, and on top of that arrange the finance through the sale of shares to clear the bank debt. It’s all your birthdays come at once,” he told the Business Post in an interview in his solicitor’s office in Temple Bar, under the shadow of the old Central Bank building.
However, the mythological resonance of Moralltach’s name has also become acutely relevant to Brennan lately.
He has spent the last few years licking his wounds after a previous attempt to float the company on the stock market ran aground somewhere between Malta, New York and the Australian stock exchange, amid suspensions, de-listings, recriminations, and a welter of bad press.
“Some people thought this was a pump and dump” scheme, he admitted, referring to investment scams that boost the shares of a company and sell them to unsuspecting buyers.
This was all just negative news coverage, he said, adding that none of it has put him off trying again. He has dusted himself off and is in the process of putting together a new portfolio of properties, including a distillery in north Dublin which he said is worth €100 million and a basket of a thousand houses worth €700 million – amongst others.
“We can’t save the world, but I liken it to the Titanic — it’s gone down and we're coming along. We can't save everyone, but whoever gets on board is lucky, because we have the facility to help them.”
But he also knows he can’t pretend that Australia didn’t happen.
Debt mountains
Brennan, who also goes by James or Kieran, was originally a property developer in north Wexford before the collapse of the Celtic Tiger. He was quite successful, he told the Business Post, saying: “Anything that’s been built in Bunclody, I built it.”
After the crash, he saw a lot of people suffering from burdensome loans and he said he began to develop a sideline in helping to negotiate people out from under their debt mountains.
That’s when he came up with the idea of Moralltach, which is based on a simple premise. The company strikes a deal with a property owner, especially one struggling with debt, which gives Moralltach what Brennan calls “contractual title” over the asset in question.
John Kieran Brennan: ‘If you want to say that Australia was a failure, you can say it that way, but I would say that this is the second go.’
The short version, he said, is that Moralltach “buys” the property from the owner for shares in the company as part of a specific contract, and “the conditionality is that we raise finance, clear their debt in a settlement, and go forward on a lease for 15 years, and they have a buy-back any time after 15 years”.
No money changes hands during the “purchase”, and Moralltach don’t own the property in question outright, but to Brennan’s mind if the company builds up enough of those “contractual titles” into a portfolio of such assets, then Moralltach can then list its shares on the stock market and potentially raise money.
The value for Moralltach is clear, but the company also claims it’s a “win-win-win” for the asset owner, since it gives them shares in Moralltach, which could rise in value; gives them a leaseback arrangement on the property; and gives them the possibility of raising funds to clear their debt.
The success of the plan hangs on the ability to list the company and use it to raise funds, so in 2016 it got what is known as a compliance listing on the National Stock Exchange (NSX) in Sydney. This would give the business the opportunity to deposit the shares in New York, for trading on the Over The Counter market, known as the OTC, which allows the trading of shares directly between investors, rather than through a major market.
The prospectus at that time described an impressive set up. First, there was Brennan himself, who had in the aftermath of the financial crash of 2008 “started a consultancy business to help business-owners and landowners deal with their financial challenges”, it explained.
In doing so, he had spotted that “this unique and unprecedented situation in the Irish economy [was] an attractive business opportunity”.
In helping people out of crippling debt, he and Moralltach had eventually developed a large asset base, and in November 2016 he decided to float it on the stock market with a property portfolio that was “independently valued at over €650 million”, according to its prospectus.
That very first prospectus listed a welter of assets, from B&Bs to private residences to green-energy projects to quarries to farms, warehouses, equestrian centres, pubs and restaurants. There was even a French castle, Château de Meillard, with 15 bedrooms and an estate of 367 hectares of farmland, which had been extricated from a bewilderingly complex litigation a few years before.
Brennan’s plan was to float the assets, raise funds — €325 million within two or three years, the prospectus said at the time — and then use the money to free the asset owners from their debt and simultaneously develop the projects.
In late 2018, Moralltach was reportedly valued at €1.4 billion, which would have placed Brennan’s stake at nearly €700 million, had he been able to sell his shares.
“Unfortunately, we ran into trouble,” Brennan told the Business Post last week. Between Brennan’s account of events and filings on the National Stock Exchange of Australia (NSX), it’s possible to assemble a timeline of events.
The first wobble the company hit came in April 2018, when the NSX wrote to it to ask hard questions about its assets.
It was at least in part inspired by an article in the Sunday Times newspaper which had reported the ESB as saying that it was “having some difficulty identifying the contracts referred to in the prospectus issued by Moralltach Global”.
In its prospectus, it had listed several companies as having contracts with the ESB, including three projects which it said had a supply contract with the semi-state “for 15 years” with set “upwardly only price adjustments”, along with another company called Sandford Energy in Kerry.
In order to clarify this, the stock exchange wrote to Moralltach asking the company to provide it with details of the company’s agreements, the commencement date of the projects, and any revenue forecasts.
In its response, Moralltach said it was “considering our legal response” to the article and confirmed that Sandford Energy had a contract with the ESB, but did not mention the other three projects.
When the Business Post asked Brennan about this, he blamed naivety for the errors.
“We didn’t put anything out there deliberately [that was incorrect], I mean you’d have to be crazy to do that. If we’d known that at the time it wouldn’t have happened. We were probably just a bit naive at the time,” he said.
Worse was to come. In July of 2018, the NSX started to interrogate the company about more of its financial figures, claiming that the information it had provided was “insufficient”.
Then, as Brennan told the Business Post: “There was also an issue came up that they didn't understand or they didn't believe our contractual title.”
As the stock exchange filings show, the NSX asked Moralltach for “the deeds of all investment properties and property, plant and equipment the company has obtained the legal title for”.
Brennan insisted to the Business Post that the company had the titles and the company answered the questions at the time, but the NSX had more questions about “the conduct of two of the directors, some of which appears to be historical in nature”.
One of those was Nick Linnane, its chief financial officer, who was the principal of Nick Linnane & Co, a Westmeath accountancy firm, which just the previous year had its business authorisation and its permission to hold clients’ money withdrawn by Chartered Accountants Ireland.
In a letter dated September 10, 2018, Moralltach acknowledged that Linnane’s firm had "acted outside of its investment category in raising funds, through the sale of securities, for Moralltach" from "existing private clients of the firm".
It resulted in two raps on the knuckles of the accountancy firm from Chartered Accountants Ireland, the supervisory body for the profession. The first was a withdrawal of the firm’s entitlement to hold clients’ money, and the second was the withdrawal of the firm’s investment business authorisation. Linnane declined to comment when contacted by The Business Post.
Moralltach argued in its response to the NSX that the regulatory decision didn’t affect it, since Linnane & Co “carries on with its accounting activities under its existing licence, which remains in good standing”. It added that this was the reason it hadn’t told the NSX, since it believed it “had no bearing on Moralltach’s activities since the event occurred prior to the company being listed on the NSX”.
The other director about whom the NSX was concerned was Brennan himself, who it turns out was struck off as a solicitor in 1995, according to the January/February 1996 issue of the Law Society Gazette.
The notice describes how “the president of the High Court ordered that the name of John Kieran Brennan be struck off the roll of solicitors”, and described how Brennan would through his law firm have to “make restitution to the Law Society of Ireland for compensation monies paid to clients” through the society’s compensation fund.
They said in the notice that Brennan had engaged in “dishonest conduct as a solicitor”; that he had “misappropriated substantial client funds”; had “falsified books of account so as to in some cases conceal, and in other cases to minimise” the apparent liabilities to clients; and that the pay-out by the Law Society had come to more than £814,000.
It also concluded, amongst other findings, that he had “prevailed upon a client to withdraw a complaint” to the Law Society; “falsified the books of account” in order to “conceal a deficit in client funds” and “misled the High Court in representing to the High Court in an affidavit sworn 25 October 1991 that the deficit was between £150,000 and £250,000”.
Brennan doesn’t dispute that he was struck off, but insists that this was unfair. A letter from his solicitor, James Flynn, the former Taxing Master of the High Court, said that his strike-off was a miscarriage of justice.
Flynn said: “The simple fact [is] that he was illegally struck off from the legal profession. It actually beggars belief and I am in the process of having the same reversed.”
In any case, by the time the NSX had begun to dig into the various issues it was concerned about, it was clear that Moralltach’s time on the Australian stock exchange was drawing to a close.
Brennan told the Business Post: “We had a right barney with the NSX and we refused to pay them the fees; one thing led to another and we were de-listed and we didn’t apply to re-list. We were advised to sue, but you don’t sue when you’re on the back foot and you’re going to have to try and regroup,” he said.
In April 2019, having been suspended since the previous year, Moralltach was finally removed from the stock exchange, with the NSX announcing that it “considers that the company is no longer suitable for listing”.
An effort to sell €400 million worth of assets to a British property fund called William Marshall didn’t work out, but by then Brennan was having his own problems.
“I'm not using this as a sob sister story,” he said, “but I went in for a check up at the Blackrock Clinic [for a neck operation] and they kept me in.”
“I had an aneurysm that size,” he said, holding his hands alarmingly far apart, “that was ready and about to go — on the aorta on the way up to my brain. And I had a valve that was only half open, so literally they kept me in.”
“I had an awful lot of time to think; I had a real chance to wind it up, to liquidate it,” he said. “But I said no. There’s too many people — small people — depending on me.”
Distillery rhapsody
Earlier this month, Brennan officially launched the second coming of Moralltach with a tantalising press release.
It described Moralltach as “a low-key Irish investment company registered in Malta”, and announced that it was “in advanced talks for a project acquisition for a €100 million whiskey distillery and business park”.
It described an exciting project in the booming whiskey sector which was “backed by stakeholders with years of industry experience” and it played on the current trend for organic, locally-sourced food and drink, describing “the concept being from field to bottle production using sustainable farming practices from multi-generational farming history that ensures the highest quality from raw ingredients through to finished liquid”.
The proposed Harvest Lodge Distillery in Naul, Co Dublin
It also rhapsodised about how “the family-owned farm will use own-grown barley for the distillation process”, about how the “draff” from the distilling will be used to feed the farm’s livestock, and how the manure will be used to grow the barley.
The circle of farm to bottle will “craft a harmonically matured whiskey with true authenticity” in line with the best “environmental, social and governance (ESG) principles”, and create “new jobs in the local area and potentially [attract] up to 50,000 new tourists every year”.
It was all part of Brennan’s plan to create some media buzz in order to stoke interest in investment in Moralltach during his investor road show.
Another press release, published just last week, announced “the on-going acquisition of multiple residential development sites” in Wexford, Wicklow, Dublin, Limerick, Cavan, Carlow and Kildare. The press release said the company had “undergone protracted talks with well-known property developers backed by a multibillion euro private equity group”, and that the sites it was in talks to buy had the capacity for a thousand properties with “an estimated total gross development value of over €700 million”.
Brennan told the Business Post there are more projects on the way. One is a property that Brennan said is "in the middle of a potential application for a grid application to build a data centre" in Limerick.
“Then we have not one, not two, but three whiskey distilleries, right? And that’s genuine. And we have a huge equine centre, which is in drastic trouble and we’ve got them virtually bailed out.”
All told, Moralltch has around 70 projects under option, Brennan said, in a portfolio that has changed somewhat since the de-listing in Australia.
Some people lost their properties, some got alternative settlements and walked away, and some he decided not to proceed with after some due diligence, he said.
The projects fall into four broad categories, according to Brennan. The first category is the debt-restructuring projects, which he said require around €30 million to clear the debts on an €80 to €100 million valuation. Then there’s the development land, including the thousand houses worth potentially €700 million, which he said requires around €200 million to build out over five years.
The third category is the green energy projects, which he said are “the sexy part” of Moralltach, and require in the region of €100 million over a three-year period. And finally there are the “specific projects”, including whiskey distilleries and quarries.
He’s a little circumspect when it comes to discussing just what the projects are, though, until they’re revealed in the company’s prospectus.
There are enough clues to facilitate educated guesses. The distillery, the Business Post can reveal, is Harvest Lodge Distillery in Naul, Co Dublin, but it hasn’t been built yet. In fact, it hasn’t even got planning permission.
Nor is it necessarily a new project. The farm is owned by the McNally family, who were previously listed as partners of Moralltach’s when it was attempting its ill-fated listing in Australia. When contacted by The Business Post, Harvest Lodge Distillery said it was also in talks with a number of other potential funders.
Overall, the portfolio has changed substantially, he reckoned, with around 30 to 40 per cent of turnover since the Australia prospectus.
What has also changed is that several years later, there’s no shortage of funding for such projects, Brennan said, and he has struck agreements for potential project finance with a German bank called Renell Bank, run by a financier called Marc Renell.
“We have a lot of contact with high-level family funds in Switzerland,” Brennan said. “Renell, for example, is saying he can put €100 million on the table tomorrow at 1 per cent.”
He said of one project that he has “documentary proof” of an offer from “an Israeli bank” to put “half a billion on the table if the project was legit”.
Black mark
The Business Post asked Brennan whether the way that the Australian listing ended might be viewed as a black mark against Moralltach, and it’s clear that he doesn’t view Australia as a failure, just as the first effort.
“It’s not that it didn’t work, it’s that we didn’t raise the money,” he said. “If you want to say that Australia was a failure, you can say it that way, but I would say that this is the second go.”
Over the last few months, Brennan has ramped up his road show, and he thinks that he could have "the final orders ready for passing at an AGM in the first week in August”.
“From that it takes a four-week application for the listing, so we have to make an application, which brings us into mid-September.”
He’s aware that a lot of IPOs were cancelled this year, and that the market is volatile, not least because of the war in Ukraine, “but I’m really anxious to do this”, he said. “Our aim is mid-October for a listing, please God.”
Once it’s done he wants to be able to sit back and let someone else run it, he told the Business Post.
“This will be huge,” he said. “I’m acting as chairman at the moment [but] I’m looking for a suitable international chairman so I can do like Tony Ryan did with Ryanair and step off the board.”
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