Zoe group's fresh application for protection begins

BELEAGUERED DEVELOPER Liam Carroll’s Zoe property group has begun a fresh application for court protection, claiming it has a reasonable prospect of survival based on a three-year business plan supported by its main creditor banks.

Central to the group’s case for survival are its claims that mainstream economic opinion believes the recession will bottom out by 2010, with a general recovery beginning in 2011; the property market here may in turn improve and properties valued by estate agents at €644 million in a “firesale” could be worth €1.2 billion over a three- to five-year period.

An independent accountant’s report by David Wilkinson of KPMG presented to the court also said Nama (the National Asset Management Agency) will have a positive impact on Irish banks, with credit becoming more readily available in 2010 and 2011 than now.

Reports by experts for ACC Bank take issue with several of the group’s claims. A report by UCD professor Morgan Kelly claims the Irish property market remains inactive despite substantial price falls, and predicts the fall in property values will be “large and prolonged”, with property prices possibly returning to mid-1990s levelsfor the next 10 years or longer.

When Michael Cush SC, for the Zoe companies, said Prof Kelly was “much more pessimistic” than other economists and the Zoe side had fully responded to his claims, Mr Justice Frank Clarke observed Prof Kelly was “laughed at” in 2007 when he predicted property prices here would fall by up to 50 per cent. Prof Kelly was “almost right”, the judge said.

The judge also noted Bank of Scotland Ireland was the only bank actually stating it believed the group had a reasonable prospect of survival. BOSI has advanced a further €50 million to finance the group’s business plan, the court heard.

The application by the seven Zoe companies began before Mr Justice Clarke in a packed High Court and is supported by or “not objected to” by the group’s major bankers. A number of creditors represented in court also supported the petition.

The Revenue Commissioners adopted a neutral stance, while ACC is the only entity opposing the application. Lyndon MacCann SC, for ACC, said it was “a lone voice crying in the wilderness”.

The petition is by Vantive Holdings and Morston Investments Ltd – the two funding companies for the Zoe group – and four other Zoe companies: Villeer Developments; Peytor Developments; Carragh Enterprises Ltd; Parlez International Ltd and Royceton.

In the event of liquidation, the companies would have liabilities, in excess of assets, of €1.1 billion, according to the independent accountant’s report.

A previous petition for protection, also brought by Vantive, Morston and other Zoe companies, was rejected in recent weeks by both the High Court and Supreme Court, which strongly criticised the absence of evidence to support the claims of a reasonable prospect of survival.

Yesterday, Mr Cush said there was considerable evidence now before the High Court addressing the previous High and Supreme Court criticisms, including letters from some banks about continuing to provide financing to the group.

Counsel said the court also had evidence, including a report from Dermot O’Leary of Goodbody stockbrokers, to the general effect the recession would bottom out in 2010 and recovery would begin in 2011.

There was also evidence the property market would improve and, “most importantly”, no challenge by ACC to the valuations provided by CB Richard Ellis and Hooke MacDonald for each individual property of the group, he said. While ACC had questioned the methodology by which those valuations were reached, it had not disputed the actual figures provided. John McCann of BNP Paribas had provided an affidavit for his side to the effect the methodology was valid, counsel added.

Lyndon MacCann said his side had understood there were issues of confidentiality concerning the valuations and that was why ACC addressed the matter in the way it had.

Mr Cush said the issue the court had to decide was whether the group had a reasonable prospect of survival, but the test did not require it to prove “probability” of survival, especially where there was conflicting expert evidence.

His case was, by 2011, the group would be solvent in the sense it would have sufficient income to meet interest repayments on bank loans and would have a surplus of some €20 million, assets over liabilities. He said income would come from rents, sales and dividends.

The case continues today.