Big question is what happens after two-year moratorium

ANALYSIS:Observers of the Carroll case believe Nama may buy most of the Zoe group's bank loans

THE PURSUIT of the protective sanctuary of examinership for one of the biggest development groups in the country rumbles on. After hearing evidence for two days, Mr Justice Frank Clarke put the case back until Monday when seven grossly insolvent companies in Liam Carroll’s Zoe group will make their final submissions.

The judge said that he will need seven days to consider a ruling.

This means the court will decide during the week of September 14th whether the companies have a reasonable chance of survival.

The Dáil returns on September 16th to debate the controversial topic of the draft Nama (National Asset Management Agency) legislation.

The Government’s “bad bank” plan surfaced as both a possible positive for the Zoe group and a negative for ACCBank, the Dutch-owned lender which is seeking repayment and yesterday was described by the judge as the group’s only “cosh-ing” lender.

Counsel for ACC, the only bank to oppose the examinership bid, said the group’s survival plan involved a two-year moratorium on interest payments due on bank loans totalling almost €1.3 billion.

Lyndon MacCann SC, for the bank, said that if the group’s loans were “Nama-ed” it was not clear how the State agency would deal with these assets. ACC could end up being owed more than the €136 million currently outstanding at the end of the two years, he said.

This is the difficulty facing ACC. During this period of suspense before the official Nama debate, it is not clear how foreign banks will be treated. ACC’s parent company, Dutch lender Rabobank, has said that foreign banks in Ireland have “to take care of themselves”.

Minister for Finance Brian Lenihan told an Oireachtas committee this week that foreign banks in Ireland had toxic asset plans in their own home countries.

Observers on the periphery of the Carroll legal action noted that the Nama plan for toxic development assets – acquire quickly and dispose slowly – may ultimately see most of the Zoe group’s bank loans bought by the State entity.

Nama officials want foreign banks to co-operate with the body.

However, ACC, as the Zoe group case has shown, is pursuing its own course of action and has appointed a receiver to four companies in the group and is trying to appoint a liquidator to two others.

These appointments are frozen pending the judge’s ruling. ACC had its first chance yesterday to outline the new evidence challenging the assumption that economic recovery in 2011 would lead to a bounce in the property market and success for the Zoe group’s three-year survival plan.

The evidence includes a report by UCD professor Morgan Kelly, a pessimist on the property sector.

ACC’s counsel said that the companies had “glided over” and “poo-poohed” Prof Kelly’s conclusions that the property prices may remain below 50 per cent of their peak values for a decade or more.

The judge said Kelly was “the leading proponent of the non-soft landing school” and that “we have all felt the bumps at this stage”.

ACC argued that Zoe’s rescue plan was “flawed and “speculative” and no more than a “deferred receivership”. The bank claimed that the companies had no chance of survival after the “incubator” of the two-year moratorium on interest payments expired in 2011.

This is what the judge must ultimately decide – do the companies have a reasonable chance of survival when this moratorium ends?

Earlier, ACC said the seven companies failed to note Ulster Bank’s recent attempts to strengthen security on its loans on Zoe’s stake in food company Greencore, which was “the jewel in the crown” in terms of realisable assets.

The judge noted that two projects to be completed would be funded by banks which had pre-let the buildings or were already lenders to the group. This includes the new Anglo Irish Bank HQ in Dublin for which the bank has agreed to advance €68 million.