THE HIGH Court has appointed an interim examiner to First Equity Group, an asset management firm with projects worth €1 billion.

Kieran Wallace, of accountants KPMG, was appointed yesterday by Mr Justice Paul Gilligan at the petition of First Equity, which manages investment projects for roughly 400 high net worth clients and institutional investors.

The case comes before the court again on January 12th.

The company was established in 1995 as a corporate finance and investment vehicle by Tom Dowling, a former tax inspector who still retains 65 per cent of the firm. It is managed by businessman Alan Barry, who has a 35 per cent stake. Its headquarters are in Dublin, but it has offices in London and Los Angeles.

First Equity Group currently has 20 projects under management - in Britain, the US, mainland Europe and Ireland. The identities of the wealthy investors involved and their capital exposure to the projects remain unknown, but the projects have a "gross development value" of about €1 billion. These include a $300 million (€215 million) residential and retail project in Beverly Hills, Los Angeles.

The company is also a 70 per cent shareholder in Onslow Suffolk Limited which plans to build the world's first indoor ski resort near Ipswich in England. The €600 million SnOasis project has received significant support from the British government.

First Equity Group said the examinership "does not affect the projects managed by First Equity Group or any investor capital, which continues to be secured independently by those projects". The group said its "net assets are greater than its liabilities", but its "cash flow has been hampered by the inability of third parties to meet their commitments to the firm".

The scale of its projects mean the group, as asset manager of the projects, has a requirement for funding on a day-to-day basis.

The company -- which has been involved in projects with a gross development value of $2-$3 billion - now faces severe difficulty raising debt and project finance and fresh capital from existing or new investors.

As a result of its cash flow shortage, First Equity Group cannot pay a 20-30 per cent annual coupon on unsecured loans for a total of €10 million from about 25 clients.

This is the immediate catalyst for the examinership process initiated yesterday, which provides 100 days' protection from creditors. Trade creditors are owed less than €2 million. "This is a responsible measure designed to ensure the continued viability of the company," the group said.

Under discussion in the examinership process will be the possibility of executing a debt-for-equity deal with the bearers of the loan notes in a scheme of arrangement, it is understood. In question, however, will be the valuation of the investment projects in property markets now in the grip of a downturn.

Also in question will be the extent to which potential participants in such a scheme of arrangement would have the financial capacity and willingness to continue supporting First Equity Group and its projects.

Should the examinership fail, it is likely that investors will be given the option of taking direct control over the projects or arranging for their transfer to a new asset manager. In any such scenario, assessing the current valuation of the projects themselves would be a prime consideration.

First Equity is the business name of Gallium Limited. The most recent accounts for Gallium show the company made an operating loss of just over €5 million, but had unrecognised profit on investments of €7.5 million in the 12 months to December 2007.

Shareholders funds stood at €10.5 million, made up of a revaluation reserve of €11.8 million less accumulated losses of €1.3 million. Mr Dowling and Mr Barry shared emoluments of €567,498.