McInerney's Irish firms have credible chance - judge

TROUBLED HOUSE builder McInerney’s business plan is realistic and the group’s Irish businesses have a reasonable prospect of survival, according to the judge who recently gave the companies High Court protection from their creditors.

Earlier this month, Mr Justice Frank Clarke appointed William O’Riordan of PricewaterhouseCoopers as examiner to five Irish subsidiaries of the listed house building specialist, which has operations in Ireland and Britain.

The companies owe €111 million to a syndicate of three banks, Anglo Irish, Bank of Ireland and KBC, which opposed the group’s bid to be placed in examinership. The company is in talks with a potential investor, US private equity player Oaktree Capital.

Mr Justice Clarke ruled in favour of the companies almost two weeks ago, but yesterday he delivered a written judgment outlining reasons behind his decision.

He said he was satisfied that McInerney’s business plan represented a realistic approach to its difficulties, even though he accepted it may not work.

“Projecting house sales into the future is notoriously difficult at the present time,” he said. “However, McInerney is far from a single project company.

“It has very significant experience in the building of a particular category of housing. Its focus appears to be towards a type of housing where there is a more realistic prospect of recovery in the shorter rather than longer term.”

Mr Justice Clarke said he took comfort from the fact Oaktree, which has committed to putting at least €10 million into the Irish operation in the short term, is willing to invest. “The fact is that Oaktree would be most unlikely to be willing to put up very significant sums of money unless it was Oaktree’s view that it could make a profit,” he argued.

“In that context it is important to distinguish the attitude adopted by an existing banker to the company on the one hand and a potential investor on the other hand.”

The banks objected to the company’s proposed rescue, which will see them take a haircut on their loans, on the basis that they would fare better in a receivership.

While the rescue deal could see them get €60 million, their lawyers said they could recover €90 million over an extended receivership. Justice Clarke noted they would have to subtract receivership costs from that figure.

Either way, he said it was “highly improbable” the banks would be fully repaid. There would, he said, appear to be some level of reduced debt at which it would make sense for the banks to do a deal.

Mr O’Riordan is to report back to Mr Justice Clarke early next month on whether or not there is a reasonable prospect of resolving the differences between the companies, Oaktree and the banks.