Banks' plan for McInerney not feasible, says director

A BANK syndicate’s plan to take over the business of house builder McInerney and run it for 11 years to recoup a €113 million loan is no longer credible or realistic, according to one of the company’s directors.

The High Court last week ruled against a rescue proposal for the group’s Irish business that included a €25 million payment to the syndicate, made up of Anglo Irish, Bank of Ireland and KBC, in full and final settlement of the €113 million debt.

Instead, the court accepted the banks’ argument that they could recover more of the debt through an 11-year receivership, during which they would take over the company’s sites, build on them and sell the houses, and ruled that the rescue proposal was unfairly prejudicial to their interests.

In a sworn statement opened in court yesterday, McInerney finance director Enda Cunningham said that the 11-year plan was no longer credible or realistic, because the State’s National Assets Management Agency (Nama) is due to take over most of the company’s loans.

McInerney wants Mr Justice Frank Clarke to revisit his ruling. It claims the banks were aware there was a chance that the loans could have been transferred to Nama, which would have ruled out the 11-year receivership, while the company believed this was not going to happen.

Mr Cunningham’s statement pointed out that Nama’s board informed the banks last December that it had deferred making a decision on the transfer of loans until the High Court hearing had run its course.

This meant they were aware that there was a possibility that the State agency could take over the debts, while neither the court nor the McInerney group knew this. The company itself believed that the agency was not going to buy the debts.

Within days of last week’s judgment, the banks began to take the first steps in transferring the debt to Nama.

Mr Justice Clarke said yesterday that it was hard to ignore that there could be a connection between the two.

He adjourned the matter until tomorrow.

The proposed rescue plan for McInerney involves a €48 million investment by Oaktree Capital, the American-based private equity fund that is bidding to buy the group.

Along with the €25 million offer to the banks, it includes a plan to provide an immediate €5 million in working capital for the group, and provision for a further €15 million if needed. The balance was to be used to pay creditors other than the banks.

While unsecured creditors will get 7 per cent of their debts, they voted to support the plan last month at a meeting organised by the company’s examiner, William O’Riordan of Pricewaterhousecoopers.

The High Court appointed Mr O’Riordan last September, and placed the company under its protection from its creditors to allow the examiner time to put together a rescue plan for the business.

McInerney employs approximately 100 people.