Zoe group judgment expected in two weeks

A CRUCIAL decision on whether to grant court protection to key companies in developer Liam Carroll’s Zoe property group will not be delivered before September 14th, the High Court has indicated.

ACCBank yesterday urged the court to refuse protection, arguing the companies’ “speculative” rescue plan is no more than a “deferred receivership” and they have no chance of survival after the “incubator” created by a two-year moratorium on bank loan interest repayments expires in 2011.

The examinership application began on Tuesday and was adjourned yesterday to Monday next when it will conclude. Mr Justice Frank Clarke said he will needs some seven days to consider his ruling.

ACC argues the seven group companies, on whose fate the entire group depends, have no reasonable prospect of survival. Its bid to wind up the companies, listed for Wednesday next, is now expected to be adjourned pending the decision on protection.

It emerged yesterday that another Liam Carroll company, Danninger (not one of those seeking court protection), faced nine winding-up petitions between August 2008 and April last.

ACC claims those petitions were “presumably bought off”. Some creditors of Danninger, including a plastering company employing 100 people, urged the judge to protect the Zoe companies.

Lyndon MacCann SC, for ACC, which is owed €136 million, argued the survival plan is “fatally flawed” and “aspirational”, will lead only to greater indebtedness of the Zoe companies and to a possible devaluation of properties on which ACC’s loans were secured.

The scheme essentially relied on a two-year moratorium on loan interest repayments agreed by the companies’ major banker creditors but any company could be rendered “solvent” by stopping creditors from securing repayment of debts owed to them.

The law does not allow an examiner to be appointed merely to secure a more advantageous realisation of assets, counsel said. The court had to assess whether each of the seven companies had a reasonable prospect of survival and the evidence was “paltry”.

Counsel also asked what would happen when the interest moratorium ended in the summer of 2011. If the National Assets Management Agency (Nama) was set up, Zoe would be “Nama-ed” and there was no indication how Nama would deal with Zoe or whether it would provide further funding. ACC itself was “Nama-free”.

The scheme also took no account of expected interest rate rises of perhaps 1-2 per cent from 2010 and up to 4.25 per cent by 2012 which could add up to €13 million to the companies’ debts, he said.

He added that the only evidence before the court relating to property prices was contained in a report prepared for ACC by UCD economist Morgan Kelly, who concluded property prices would not return to inflated “property bubble” 2007 levels and were likely to stabilise at the levels of the mid-1990s.

Counsel argued that the court should not entertain the petition at all because it was “an abuse of court process” and a “second bite of the cherry” for the companies, grounded on evidence which the companies’ management, against legal advice, chose not to put before the court in their first petition for protection.

Bill Shipsey SC, beginning his closing reply to ACC, said yesterday that ACC was in a worse position over interest repayments because it had “come late to the party” when granting development loans to two Zoe companies in mid-2007 and early 2008.

ACC “clearly failed to read” Prof Kelly’s 2007 report (predicting 40-60 per cent falls in property prices).