Examiner at Zoe would benefit ACC, court told

ACC was “shooting itself” in the foot by opposing court protection for seven companies in the Zoe group and would do better if they went into examinership, the High Court was told yesterday.

If the Zoe companies were liquidated, a stamp duty debt of €4.5 million to the Revenue would rank ahead of ACC’s debt, Bill Shipsey for the Zoe firms said.

The court reserved to Thursday its ruling on their second application for examinership.

It was of “enormous significance” that the majority of the group’s banker creditors either supported or did not object to protection, he said. It was also of interest that Dutch-owned ACCBank only got “Dutch courage” to oppose protection after the High Court rejected the first bid for examinership, he added. While ACC was entitled to try and cut its losses, the Zoe firms and most of their banks were “not so fortunate, as they have to live here and make the best of the situation”.

This “unique” application was predicated on “some hope over despair” for the economy in general and for the Irish property market over the medium to long term. There was now enough evidence before the court to justify allowing the companies try and save themselves for their sakes, and that of their creditors and employees, counsel argued.

In the 19 years since the examinership laws were introduced to save the Goodman group of companies, there had not been a case where the wider public interest was “so much to the fore”.

While the National Asset Management Agency (Nama) was not yet in existence and the court could not speculate on what would happen, the situation was that more than 50 per cent of the group’s debts are exposed to Nama, counsel added.

The aim of Nama appeared “on all fours” with proposals in the companies’ survival plan to allow time for the markets to stabilise and help ensure property asset values are enhanced to the benefit of the companies and banks. Nama might be able to lend monies if it considered it was to its advantage.

Even if UCD Prof Morgan Kelly – the “Cassandra” of the property market – was correct in predicting Irish property prices would return only to mid or late-1990s levels after a decade or more, the Zoe group had already applied substantial discounts of some 50 per cent to peak property market values of 2006, counsel also argued.

Zoe had prime sites in Dublin’s docklands, “a world away” from agricultural land zoned industrial down the country, counsel said. All it wanted was a chance to try and work out a survival scheme over the next 80 days.

The court heard properties charged in favour of ACC were valued at €135 million to €153 million on the basis of December 2008 valuations. ACC is owed €136 million, which would, with interest, increase to €143 million.

Addressing the effect of a possible rise in interest rates, counsel said rates could be fixed and AIB was offering a rate of 2.7 per cent up to 2014. A rate increase could add up to €14 million to ACC’s debt. Mr Shipsey said inbuilt flexibility in cash-flow projections would go a long way towards addressing interest issues.

The court heard it was intended that no interest would be paid on Zoe’s debt to Anglo Irish Bank until 2014.

The three-day protection hearing concluded yesterday. ACC opposes the application to appoint an examiner to seven Zoe companies, and its separate application to wind up two key funding companies in the group, listed for tomorrow, is expected to be adjourned pending Mr Justice Clarke’s judgment.

The judge has to decide whether the seven companies, on whose fate the entire Zoe group depends, have a reasonable prospect of survival. The companies claim they do, based on a three-year business plan grounded on a two-year moratorium on interest repayments on bank loans.

It is claimed the group will be “balance-sheet” solvent by 2011 with sufficient income of some €40 million from property rents, sales and share dividends to meet interest repayments and provide a surplus of some €20 million in assets over liabilities.

A previous petition was rejected by the High and Supreme Courts on grounds of no evidence to support the group’s claim of a reasonable prospect of survival. If liquidated, the seven companies would have some €1.1 billion in liabilities, the court has heard.