Cross-guarantees of €714m threaten Carroll companies

TWO HOLDING companies in developer Liam Carroll’s Zoe property group, which secured High Court protection last week, have cross-guaranteed debts of €714 million within the group, according to submissions to the High Court filed by the group.

The figures show the scale of the interdependency between companies across his property development business and how a threat of insolvency action against any of his main companies has the potential to cause major difficulties across his business.

The potential domino effect across the group is illustrated in the independent report compiled for the group by Dublin accountants LHM Casey McGrath, which has been seen by The Irish Times.

The report shows one of Mr Carroll’s holding companies, Morston Investments, registered in Jersey, has provided cross-guarantees totalling €489.6 million on debts owing by other companies in his group. Another holding company, Vantive Holdings, has provided cross-guarantees totalling €224.4 million to other group companies.

Morston and Vantive are among six companies to have been protected by the court after ACCBank threatened insolvency proceedings against them to recover loans of €131 million. The role of the companies was to channel bank loans to subsidiary trading companies below them within the group.

The six companies, which were described in court last Friday as the Zoe Group, were the only companies with a direct or indirect exposure to ACC’s loans.

ACC, which is owed €131 million on its loans and €4.8 million in unpaid interest and arrears, issued letters to Morston and Vantive seeking repayment within 21 days.

The bank, owned by Dutch group Rabobank, noted the inter-mingling of debts between group companies in its demand letters and threatened to liquidate other companies across the group.

ACC’s lawyers said in a demand letter to Morston on June 29th that the company was owed considerable sums in March 2008 by debtor companies within the Carroll group. They included one of Mr Carroll’s best-known development companies, Danninger, which owed Morston €86 million.

ACC’s Jersey-based solicitors, Mourant de Feu Jeune, said that if Morston did not repay the bank in full, it would apply to appoint “a viscount” – the equivalent of a liquidator – in insolvency proceedings in the Royal Court of Jersey.

“Our client will provide such funding as to enable the viscount to realise all of their [the companies’] assets, including by winding up the said debtor companies,” the bank’s solicitors say in the letter.

The law firm noted that Morston had “numerous subsidiary companies”, adding that it “will be the duty of the viscount to realise any value possible from those subsidiaries, including by liquidating them if necessary”.

The Zoe Group of six companies has total debts of €1.35 billion at June 30th, according to the accountants’ report. This includes €1.273 billion owing on bank loans and €24.7 million on overdrafts and current accounts. Trade creditors are owed €30 million and other creditors, €22.5 million.

The group said in court submissions that its assets could be valued at €1.6 billion and that it could emerge with net assets of €290 million if it could develop sites and sell properties over a three-year period, with breathing space from its debts.

The court was told that banks representing 90 per cent of the group’s overall liabilities were supportive of the three-year rescue plan, but ACCBank was the only bank opposed to the business plan.

Among the measures proposed under the plan was a two-year moratorium on interest payments on bank loans. Allied Irish Banks and Bank of Scotland (Ireland) are the largest lenders and are owed 40.8 per cent and 26.8 per cent of the group’s overall liabilities.