Reprieve as shelter of Nama moves closer

THE QUEST for survival continues as seven grossly insolvent companies in Liam Carroll’s development group, Zoe, were granted yet another reprieve to seek court-approved breathing space from bank debts of €1.27 billion.

Yesterday Mr Justice John Cooke, the fourth High Court judge to assess the group’s prospects for survival, presided over a hearing about whether the court should agree to another hearing, a second application for protection.

His decision to allow the seven companies to make a new bid for examinership puts the developer back to the position he held on July 17th, when the court permitted six Zoe companies to make their first bid for protection.

After failing to secure protection in the High Court and the Supreme Court, the group returned to the High Court for a second bite of the cherry. Mr Justice Cooke said there was “a clear imperative” to hear the case for survival again. The judge will give his reasons on Monday, and set a date for the hearing.

A petition to decide on the appointment of a liquidator will be heard on September 9th. The liquidator, Declan Taite of Dublin firm FGS, was provisionally appointed last week on the back of an application by Dutch-owned ACCBank. The bank is the only lender to oppose the survival plan as it seeks to recover loans of €136 million.

Senior counsel for the bank, Lyndon MacCann, said he had to take instructions after ACC failed to stop the fresh attempt at survival.

The companies are still in an unusual position – they have temporary court protection pending the examinership hearing, while a liquidator is in place over two companies, and a receiver (also Mr Taite) has control over another four – all due to ACC’s actions.

The case for survival pivots on the evidence in the latest petition.

The group says it is willing to provide the detailed business plan drafted last December showing future valuations for individual properties to support the group’s survival plan. They want these examined by the court in private.

A more extensive independent accountant’s report, compiled by KPMG, which devised the business plan, argues that the group has a reasonable prospect of survival. ACC claimed the latest bid for protection was “extraordinary and unprecedented” in the history of corporate litigation, and amounted to an abuse of process, as the application had already been considered and rejected by the courts.

The companies argued they were entitled to a second chance with new evidence and with the support of employees and trade creditors who were at risk of losing money and of severe financial difficulties.

All this brings Carroll’s empire ever closer to Nama, the Government’s toxic loans agency, which will assume many of his loans in its first acquisitions.

Nama’s difficulty is that almost half of the Zoe Group’s €1.27 billion bank loans are owing to foreign lenders not expected to participate in the plan. This is one reason why ACC is demanding repayment of its loans.

The full hearing for protection and the possible appointment of an examiner, who would have up to 100 days to try to formulate a rescue, would also benefit the Government as the draft Nama legislation will be debated next month.

Nama may well be in operation before any rescue plan is agreed.

The companies have argued that their survival was contingent on ongoing finance and that Nama may have a positive impact on the level of credit available to Zoe.

Examinership would buy the group time to work through its debts and also allow it to access fresh credit under the Nama plan.

Yesterday’s reprieve pushes the group a little closer to the protective shelter of examinership – and whatever benefits that may accrue from Nama during that breathing space – and away from the actions of ACC, property seizures and potential fire sales.