The Commercial Court will rule on Friday on the appointment of an examiner to six companies controlled by Liam Carroll, one of the country's biggest property developers.
Before appointing an examiner, the court has to find the companies have a reasonable prospect of survival and Mr Justice Peter Kelly expressed several concerns today about the group’s proposed survival scheme which depends on the bank’s giving “breathing space” to it for some three years.
The judge said the proposed scheme includes “pouring” money into developments over the next three years when the office space market was already “grossly oversupplied” and the residential market was “flat as a pancake” and showing no sign of revival.
The court heard charterd accountant Fergal McGrath, author of the report of the independent accountant recommending the survival scheme, was a member of the Zoe group’s auditors, LHM Casey McGrath.
The judge noted the independent accountant’s report recommended existing senior management remain in place. “The captains who navigated the ship onto the rocks are to remain in charge,” he observed.
An “extraordinary” number of directorships were held by directors of the petitioning companies “no doubt for the best fiscal reasons” and the court had to deal with “a maze, a spider’s web” of companies, he added.
All of the group’s major banker creditors and the Revenue have adopted a neutral stance towards the examinership application and the court heard some of the banks had advanced further monies to pay off most of the group’s trade creditors.
AIB and Bank of Scotland Ireland are the largest lenders with 40 and 23.8 per cent of the €1.1 billion borrowings respectively.
ACC Bank, which earlier this month issued letters of demand over its €136 million debt, said it was “guardedly neutral” but its counsel Rossa Fanning warned that stance could change during the examinership if the National Assets Management Agency (Nama) legislation was deemed unfavourable towards the bank.
Michael Cush SC, for six key companies in the Zoe group which effectively finance all the other companies, indicated the exercise of “forbearance” by the banks was crucial to the survival scheme. The group had engaged with the banks last December and produced a survival plan agreed to by all banks except ACC.
An orderly realisation of assets was being proposed and it was anticipated there would be a Eu 300 million surplus after three years and all creditors would be paid, counsel said. The group had sold 39 units for €11.7 million since last December and had a rent roll of €25 million which was expected to increase.
Mr Cush said the group had a number of “quality” sites in Dublin’s docklands which would “regain value when the property market improves”. Counsel read from an affidavit of Mr Carroll’s, stating he believed the sites would be at the forefront of the future development of Dublin.
Mr Cush added valuations from CBRE and Hooke and MacDonald of December 2008 were included in the papers before the court. In reply to the judge, he said these valuers had worked for the Zoe group as had practically all valuers.
The consequences of protection being refused and the group being wound up would be “enormous”, counsel also said. It was very unlikely the market could absorb such a huige property portfolio at once.
In reply to the judge, Mr Cush agreed some 104 people were directly employed by the group and a figure of 650 jobs previously referred to included some 550 sub-contractors who were not employees. A liquidation would have a huge knock-on effect for many people, he said.
The petition for protection is by Vantive Holdings which, with Jersey-registered Morston Investments Ltd, is the parent companies of about 50 companies known as Zoe Developments.
The petition was brought after four companies within the group, Villeer Developments, Peytor Developments, Caragh Enterprises Ltd and Parlez International Ltd, were presented with demands from ACC for the repayment of €136 million loans given to them in 2007 and 2008.
Mr Justice Kelly was told the independent accountant’s report believed a scheme of survival could be put in place allowing the companies trade out of their difficulties. The court heard the independent accountant’s report was prepared over four days. Mr Cush said the auditors, by virtue of their work for the group, had considerable knowledge about it.
