ACC ACTION FAILS:Ruling will block a knock-on effect on rest of Fleming group, writes SIMON CARSWELL
ACCBANK, THE Dutch-owned Irish lender, failed in its attempt to stop a company within the group owned by Cork property developer John Fleming appointing an examiner to try and rescue the firm.
The High Court agreed to an application by the Fleming company, Tivway, to appoint the examiner and to continue an order setting aside the appointment earlier this month of a receiver by ACC. The receiver would have taken control of the firm and sold its assets at firesale values in a depressed market to recoup the loans.
The move not only blocks ACC’s attempts to recover €21.5 million in loans, but stops the knock-on effect on the rest of Mr Fleming’s group. ACC’s action could have had a domino effect, ultimately toppling the wider Fleming group.
The court heard that Mr Fleming’s companies, JJ Fleming Holdings and John J Fleming Construction – two significant companies within the group – had guaranteed Tivway’s loans from ACC.
Tivway and ACC’s debt may have amounted to a small domino in the context of the overall group but the receivership could have affected much larger bank loans.
Lyndon McCann SC, representing Tivway, told the court that if the company folded, Anglo Irish Bank, which is owed €268 million by the group, would have “no alternative but to engage in the unpalatable action of calling in the debt”.
This would have led to the collapse of the group, he said, and the threat to some 650 employees.
The group’s debts are colossal. They were only alluded to in passing yesterday – the court was told that ACC’s loans to Tivway represented less than 2 per cent of the group’s overall debts. This amounts to just over €1 billion.
Just three days earlier, the court heard of debts totalling €1.2 billion owed by companies connected to developer Liam Carroll. Mr Carroll’s action is similar to the threat faced by Tivway. He sought to prevent ACC taking control of one or more companies in his Zoe group by applying to appoint an examiner.
Mr Carroll will have been buoyed by Tivway’s success. He will seek the appointment of an examiner to his firms on Monday.
Tivway said that it was a special purpose vehicle involved in the construction of a 14-storey office building in Sandyford, Dublin.
ACC argued that the company did not really trade as it only owned two properties – the Sandyford building and a two-thirds share in an adjoining site.
Tivway countered, saying that it was a development firm. It argued that ACC could still attempt to recover its loans under the examiner’s rescue process and this would not prejudice other banks.
Mr Justice Brian McGovern sided with Tivway and the examinership option given that two unidentified investors were “in the wings” ready to invest in the firm.
The appointment gives Tivway up to 100 days’ court protection and creates an orderly process by which the examiner can agree a rescue plan for the company.
Tivway’s counsel told the court that there had been advanced talks between the group and its banks, the group had “a high degree of confidence” and it could solve its difficulties without resorting to “a formal insolvency process”.
ACC’s move forced Tivway into this process. The bank hinted in court at why it may be taking such aggressive actions to recover loans to various property developers.
Denis McDonald SC, for the bank, said that by appointing a receiver to Tivway, ACC would be acting before the creation of the State’s “bad bank” Nama, which will buy development loans from the six domestic guaranteed banks. He said that ACC wanted to realise its security without regard to the Nama effect on the sector.
ACC falls outside the Nama plan, but the bank is evidently concerned about the effect it will have on the value of development loans across the Irish banking system and the risk facing its own assets.
