LIAM CARROLL, one of the country’s largest developers, has been left exposed to the threat of an insolvency action by his banks to seize control of his Zoe Group of companies after the Supreme Court withdrew court protection from them.
Six companies in Mr Carroll’s group, which owes eight banks €1.2 billion, failed in an appeal to the Supreme Court to overturn the High Court’s refusal to extend their court protection. The withdrawal of protection to such a large development group and the potential large-scale sell-off of properties at fire-sale prices may pose complications for valuing toxic development loans bound for the “bad bank” Nama.
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”.
