Collapse in the Irish property and construction sector hit veteran business hard, writes CAROLINE MADDEN

YESTERDAY’S HIGH Court decision dealt what may prove a fatal blow to McInerney’s bid to stave off receivership, but the warning bells have been ringing for the homebuilding firm for some time.

At the height of the boom in 2007, McInerney, one of the country’s oldest homebuilders, had revenues in excess of €200 million and was expanding quickly.

However, the collapse in the Irish property and construction sector hit its business hard. By 2008 it was in the red, posting a loss of €47 million. In 2009 it lost another €25 million.

It was also forced to write-down the value of its land banks in Ireland and Britain radically – in June 2009 it cut its estimate of the value of these assets by €156 million. This in turn led to a breach of the covenants, or terms, of its bank loans in November 2009.

Protracted negotiations then began between McInerney and its lenders in an effort to hammer out new terms for the €236 million of loans the company owed.

In March 2010 McInerney appointed Goldman Sachs to advise on a restructuring process, the first signal the company was looking for a new investor. This search led it to Oaktree Capital, a California-based private equity group which was willing to take a stake in return for a €40 million investment.

However, in August 2010, things rapidly unravelled. The banks cancelled McInerney’s overdraft and demanded it hand over 100 per cent of its takings from house sales, leading McInerney to seek refuge from its Irish creditors through the High Court. Billy O’Riordan of PricewaterhouseCoopers was appointed as interim examiner to put together a rescue plan.

McInerney’s banks opposed the motion to place the business into examinership, arguing that they would fare better under a receivership.

A chink of light appeared last November when the majority of McInerney’s creditors backed a €48 million restructuring plan which was based on a rescue offer from Oaktree Capital. The proposal involved Oaktree paying a syndicate of three banks, Anglo Irish, Bank of Ireland and KBC, €25 million cash in full settlement of a secured €113 million debt. It originally offered the banks €60 million when talks began last August.

However, following yesterday’s decision, receivership now looms large over the business despite its best efforts to avoid such an outcome.

This saga represents the fourth restructuring of the company since it first went public in 1971 and is the third time shareholders have taken a significant hit.