Provisional liquidator appointed to Carroll firms

 

The High Court has appointed a provisional liquidator to two companies in Liam Carroll’s Zoe Group following an application by ACC Bank today.

The bank’s move follows a decision by the Supreme Court yesterday to withdraw court protection from them. The six companies in the group owe eight banks €1.2 billion and failed in an appeal to the Supreme Court to overturn the High Court’s refusal to extend their court protection.

Today, lawyers acting for ACC made a winding up petition before Mr Justice Iarfhlaith O'Neill seeking the appointment of accountant Declan Taite of Farrell Grant Sparks (FGS) as provisional liquidator for Vantive Holdings and Moston Investments.

Both are holding companies that distribute loans across the Zoe group. Dublin-based Vantive owes ACC €63.9 million while Jersey-based Morsten owes that bank €72.1 million.

Mr Rossa Fanning BL, for ACC, told the court the companies were “grossly insolvent” and unable to pay debts as they fall due. He said any hope of examinership for these firms had passed. “These companies have nowhere else to go but liquidation," Mr Fanning told the court.

The action was precipitated by the issuing of demand letters by ACC to the companies on June 29th seeking the repayment of loans within 21 days. This prompted the Zoe Group to seek court protection.

Mr Justice O’Neill granted a series of orders sought by ACC authorising Mr Taite to appoint additional directors, secure assets, open bank accounts and appoint solicitors.

A full hearing of the application will be heard on September 9th.

Bank shares tracked lower this morning before recovering by 12.15pm. AIB shares were down 1 per cent at €1.98 while Bank of Ireland stock was off 2 per cent at €1.97.

In a note to investors this morning Bloxham Stockbrokers said the appointment of receivers now appeared inevitable and said the breakup of the Carroll property empire “appeared to pose problems for Nama in its directive of achieving an ordered work through of the large property interests in the country”.

The court heard yesterday that the property market could not absorb such a large amount of property coming on to the market.

The Department of Finance rejected any suggestion that the Government’s plans for Nama were affected by the court ruling. “It makes no difference – Nama will proceed as planned,” said a spokesman for the Minister for Finance.

“We’ve always made clear that Nama will operate in line with EU Commission guidelines, which set out the use of the long-term economic value measurement.”

The Supreme Court refused to overturn a High Court ruling last month rejecting the appointment of an examiner to the six companies which would have given them breathing space from their bank debts to devise a survival plan.

The court found that it was not possible to reach any conclusion about the companies’ survival prospects “in the absence of any evidence about the likely future development of the property market”.

Mr Carroll’s companies had submitted a rescue plan to the court which showed that if the group could develop its existing sites and sell assets on an orderly basis over three years it could emerge with a surplus of €290 million. As it stood, the companies seeking protection had a deficit of €265 million, while the wider Zoe Group was facing a shortfall of more than €1 billion if liquidated.

The plan devised for Zoe and Mr Carroll’s two other groups, Dunloe Ewart and Orthanc, also proposed a two-year moratorium from interest payments to the groups’ banks.

Supreme Court judges, the Chief Justice, Mr Justice John Murray, Mrs Justice Susan Denham and Mr Justice Nial Fennelly, said in their ruling it was “perfectly obvious that some evidence of likely improvement in the property market is absolutely essential”.

However, they found that neither Mr Carroll nor the independent accountant’s report, on which the application for court protection was based, “makes any attempt to supply this deficiency”.

The court concluded that Mr Carroll’s companies had “not established that its strategy for the future orderly disposal of the key assets of the company is credible or reasonably viable”.

The removal of court protection from the companies leaves a large part of Mr Carroll’s overall property development empire exposed to an action by ACCBank, which is owed €136 million by the group.

Mr Carroll’s companies had sought court protection last month following a repayment demand and a threat by ACC to liquidate companies across Mr Carroll’s groups. The group’s seven other banks supported the proposed rescue plan.

It is understood that a number of banks were yesterday preparing to issue demand notices to Mr Carroll’s companies seeking repayment of their loans in anticipation that his court appeal would fail. The demand notices pave the way for the appointment of receivers, allowing each bank to seize properties across Mr Carroll’s group.

A spokeswoman for ACC had no comment on the bank’s intentions.

One source close to the banks said the Supreme Court’s ruling would stop other developers turning to the courts for protection, but could “create mayhem” with other non-Nama banks seeking the recovery of their loans.

Mr Carroll’s survival plan, seen by The Irish Times, valued Zoe’s land and development projects at €991 million, and investment properties at €411 million.

Mr Justice Peter Kelly, in the High Court, had found that the valuations in the survival plan were “lacking reality” and bordering, if not trespassing, on the “fanciful”.