Examiner must devise rescue plan that will satisfy property firm's creditors

A key issue will be if the plan reduces the value of the group's loans, writes BARRY O'HALLORAN

THE FLEMING group’s High Court-appointed examiner, George Maloney, has until the middle of next month to finalise a rescue deal for the building and property development business.

The 100-day examinership period began when Tivway was granted protection in July, and runs until the middle of next month. By then, Maloney has to come up with a rescue plan, known as a “scheme of arrangement”, that will get the support of creditors.

The main creditors are banks, whose loans to the companies are secured against their property assets, mainly in the Sandyford area of Dublin, where the firm has a large mixed commercial and residential development under way. The company owes Anglo Irish Bank €266 million, AIB €130 million, and Bank of Scotland (Ireland) €48 million. These financial institutions supported its examinership bid, as did a large number of unsecured creditors. But ACCBank, which is seeking the repayment of €21.5 million, opposed it.

A key issue will be whether the scheme of arrangement will involve reducing the value of the group’s loans.

When Tivway was placed in examinership in July, an independent accountant’s report pointed out that the overall group had debts of €900 million and intended repaying these over periods of five and 10 years. On that basis, a rescue deal may not involve any writedowns. But there are precedents in other examinership cases for banks agreeing to take less than the full amount due on secured debts.

If the examiner succeeds in putting a rescue plan in place, another issue will be the impact that this will have on the National Asset Management Agency (Nama), which is likely to begin buying banks’ property-related loans in earnest towards the end of the year.

Lawyers would not be drawn yesterday on what might happen, but they did agree that loans to Tivway and its associated Fleming group companies could still qualify for Nama, irrespective of the examinership process, and could be taken over by the State agency. What is not clear is whether, if the examinership results in the loans’ value being reduced, this will cut the price that Nama pays for them.

But before those issues are dealt with, Maloney has to finalise a scheme of arrangement. The fact that most of the firm’s banks supported the examinership bid indicates they are likely to favour his plans.

Creditors will get an opportunity to vote on the scheme of arrangement. If they support it, it goes to the High Court for approval. If a creditor can demonstrate it would be better off if the company were in receivership or liquidation, the court has to rule against the proposals, and the firm could be wound up or, at the least, the scheme would have to be changed.

Lawyers say it is possible a creditor could have the rescue plans overturned and have the company wound up. But they say this would be unusual because examiners propose schemes designed to ensure creditors are not prejudiced, and because the scheme can be amended to deal with any creditors’ concerns.