Zoe failure to present evidence of property upturn 'baffling'

ACC SUBMISSION:LIAM CARROLL'S Zoe companies had demonstrated a "baffling failure" to present any evidence of an upturn in the property market on which their survival proposals depend, ACCBank told the Supreme Court.

Having seen the draft Nama (National Asset Management Agency) legislation, ACC had changed its stance on examinership for the Zoe companies from “guarded neutrality” to opposition, Lyndon MacCann SC, for ACC, said. While the actual Nama legislation may not accord with the draft proposals, ACC considered, based on what was outlined now, that it would be prejudiced.

It was also concerned about the “deficiency of evidence” to support the companies’ claim to have a reasonable prospect of survival. The court had been referred to property asset valuations of December 2008 but the “big lacuna” was that those actual valuations were not before the court.

Counsel said independent accountant Fergal McGrath, on whose report the companies relied, had “not bothered” to talk to the valuers to assess the integrity of the figures. Mr McGrath had expressed no view on assumptions made by management.

There was “no evidence” before the court about the future state of the property market, although that was critical to survival proposals. The survival scheme was predicated on the suggestion that a realisation of assets was attainable over the next three years but, if such evidence existed, it was not before the court.

Mr MacCann also queried the companies’ claim that the High Court was wrong to set the companies €1 billion bank debts as the starting point for achieving a turnaround, rather than what Mr Cush described as the “current deficit” figure of €259 million. The €1 billion debts were as much a liability of all the companies as of the two holding companies, he argued. The fact that most of the companies’ banker creditors support examinership did not mean those banks believed the companies could survive. The banks could have “different reasons” for their stance, including that examinership could lead to a more orderly realisation of assets than liquidation. While that might be a reasonable view, it was not justifiable under legislation. ACC was also concerned about the “type of support” being offered by the other banks in providing funds to pay off unsecured trade creditors which could “be a type of fraudulent preference”.

The business plan presented by the companies last December to the banks, at the banks’ request, was not before the court and the fact most of the banks supported it was not an indication they believed it was a basis for survival.

There was no reference in either Mr Carroll’s affidavit or the independent accountant’s report to any commitment by the banks to continue to finance developments by the companies.