Zoe's quest for protection continues

ANALYSIS:It's back to square one for the group in terms of convincing the court of rescue plan's merits

ANOTHER DAY, another court outing in the epic battle for court protection for companies in Liam Carroll’s Zoe development group.

Mr Justice John Cooke outlined in detail yesterday why he agreed last Friday to give grossly insolvent Zoe companies a second chance to seek the appointment of an examiner and vital breathing space from Dutch-owned ACCBank to devise a rescue plan.

The judge said he was satisfied that new evidence from the companies was of sufficient “cogency” and detail to grant the full hearing of the new petition – in what will be the second in six weeks – before another judge next Tuesday.

KPMG, the new independent accountants who are supporting the latest bid for survival, estimates that the companies would have assets worth €1.36 billion if there were an orderly development of sites and asset sales over time.

Given that the group has debts of €1.35 billion, including bank loans of €1.27 billion, this would leave the group with a surplus of €10 million, KPMG has estimated.

Yesterday, Mr Justice Cooke shed more light on the potential debt write-off facing the group.

While the crucial KPMG-drafted business plan of December 2008, on which the group had first pegged its hopes for survival, predicted a work-out over three years, the commercial property valuers to the group had since revised this up to between three and five years.

Updated evaluations had also been adjusted since December 2008 to take account of a 10-15 per cent fall in investment properties and a 15-25 per cent drop in development sites over that time.

The judge said Enda Lady, a director of CB Richard Ellis, commercial property valuers to the group, said Zoe’s properties would be worth €1.2 billion on an orderly work-out of its problems but €644 million if sold over six months in “forced or distressed” disposal.

KPMG has estimated that overall the seven companies seeking court protection face a deficit of €1.155 billion if liquidated. There is, therefore, much to play for when one of the country’s largest developers seeks protection for one of his three development groups in court next Tuesday.

The hearing is expected to last two days and to be heard by Mr Justice Liam McKechnie, who will be the fifth High Court judge in six weeks to hear pleadings by the group in its quest for long-term protection.

Next week’s sitting may also hear conflicting views from economists on the prospects for the Irish economy and property market.

ACC, whose threats to liquidate companies in the group over €136 million in unpaid loans precipitated the cases, said it planned to file an affidavit from an economist in response to the group’s claims.

As part of the new evidence filed by the companies, a report by Dermot O’Leary, chief economist at Goodbody Stockbrokers, was submitted which projected an economic recovery in 2011. The report was submitted to meet concerns raised by the High Court and the Supreme Court in the first petition that there would be an upturn in the property market to support the plan to keep the group afloat.

ACC, which has described the second petition as “vexatious”, also plans to submit affidavits from a bank official, a property valuer and an insolvency practitioner in response to the evidence.

Mr Justice Cooke ruled that the new application should be heard in the interests of employees, creditors, subcontractors and suppliers.

He said these parties should not be affected by past mistakes, misjudgments and perhaps misconduct of shareholders, in reference to the withholding of the key business plan and deficiencies in earlier evidence.

He found that the contents of letters of support from the group’s banks – another crucial part of the group’s survival plan – were “less than satisfactory”.

This latest ruling is a win for the group but puts the companies back to square one – they must try to convince the court again that there is merit in their rescue plan.