The High Court has confirmed the appointment of an examiner to three companies connected with the four-star Meyrick Hotel in Galway City.
However, Mr Justice Tony O'Connor said he was not satisfied to continue the protection of the courts to four related firms involved in the operation of other Galway-based businesses including the five star G Hotel and the Eye Cinema.
All seven companies are part of the Edward Capital Group which is controlled by businessman Gerry Barrett.
Deutsche Bank, which is owed more than €690 million by the group, had opposed the examinership.
The bank, represented by Neil Steen SC and Paul Gallagher SC, argued the examinership application was an abuse of process and an attempt by the companies to renege on a debt settlement agreement which would have resulted in the sale of the group’s assets to reduce its debt to the bank.
That was denied by the companies, who argued that Deutsche Bank had breached the settlement agreement.
Interim examiner
Following the court’s ruling Gary McCarthy SC for the companies said his client would appeal the refusal to grant the four firms the protection of the courts.
The court agreed to put a stay in relation to the four companies it has refused to allow remain in examinership to early next week.
All seven had sought the appointment of an examiner after DB appointed a receiver over the firms, which employ more than 330 full-time and part-time people.
Last month the firms secured the protection of the High Court and insolvency practitioner Neil Hughes of Baker Tily Hughes Blake was appointed interim examiner over the companies.
The application was made to have an examiner appointed after the bank appointed a receiver over the firm’s assets.
The firm's directors, Gerry Barrett and Catherine Barrett of Drimbawn House Chestnut Lane, Lower Dangan, Galway, accept the group is "very significantly indebted" to the bank – to the tune of €698 million.
They claimed while they could service a certain level of the debt a large amount of what is owed can never be repaid.
It was argued by the companies that the creditors, employees would do better in a scheme of arrangement put together by an examiner, which would allow the firms to continue to trade as a going concern.
Loan portfolio
BD which acquired the group’s loan portfolio from Nama in 2015, said that the examinership would not be better than the agreement the parties had reached in regards to the sale of assets, included the proposed sale of the Meyrick to a third party for €16.7 million, to reduce the group’s debt.
In his ruling Mr Justice O'Connor, citing his concern for the customers and the employees of the Meyrick hotel, said he was satisfied to confirm Mr Hughes as examiner to the firms involved in the ownership and operation of the premises ML Meyrick Ltd, MT Mono Trading Ltd, and Kitty Hall Holdings Limited.
He said he was satisfied the examiner should be confirmed and be allowed put together a scheme of arrangement in respect of those companies as he held they had a prospect of survival as going concerns.
Abuse of process
Mr Hughes has up to 100 days to put together a scheme of arrangement in respect of those companies.
The judge dismissed the application to allow the firms Edward Leisure Assets Unlimited Company, Niche Hotels Unlimited Company, Style City Limited and Radical Properties Unlimited Company remain in examinership.
He said he was doing so for a number of reasons including that the “primary motivation” behind the application for the appointment of an examiner was an attempt by Mr Barrett “to retain control of the firms in defiance of the settlement agreement.”
That was not what examinership is for, the judge said.
The judge said the purpose of examinership was one which would benefit the community and in particular take into account the interests of employees, creditors and customers of the businesses.
The judge said that he also found that the application was a legal abuse of process.
The judge added he was also taking into consideration an undertaking given by DB that the G Hotel and the cinema would remain open pending a sale to potential buyers.
The assets of those firms include the G Hotel, the Eye Cinema property assets including 38 apartments, a retail park a house and sites in the Galway area.
The matter will return before the court later this month.
