THE ACCOUNTANT whose expert evidence was used by ACC Bank to contest Zoe group’s second examinership bid argued yesterday that the group itself needs to take the first steps in winding the business up.
The Liam Carroll-controlled group is facing the prospect of being wound up if its lawyers do not opt to appeal Mr Justice Frank Clarke’s refusal to place it examinership and under High Court protection from its creditors.
Simon Coyle, an insolvency specialist with accountancy practice Mazar’s, pointed out that the domino-effect of a liquidation or receivership means that up to 51 companies could ultimately end up in any such process.
Mr Coyle wrote an independent report which ACCBank used to support its case against Zoe’s attempt to be placed in examinership. The Dutch-owned institution is seeking the repayment of €136 million and was the only group creditor to oppose Zoe.
Along with ACC, a number of other banks have secured loans on the group’s assets, including Bank of Ireland, AIB, KBC, and Ulster Bank, all of whose claims will have to be dealt with.
“The group should put its hand up and try to put some sort of formal insolvency structure in place itself,” he said. “It can do this by either applying to the courts to have a liquidator appointed or by inviting the banks to appoint a receiver.” He added that as the group is insolvent, to stay in business means it would run the risk of trading recklessly.
Any insolvency process is going to involve dealing with inter-related claims over the assets of inter-related companies. As all the banks have secured loans, lawyers say that they each have the right to appoint their own receiver.
ACC has so far appointed one receiver to four companies, but one lawyer yesterday said it was possible that the group could end up in the hand of a number of receivers representing a number of banks.
A receiver’s key job is to recover the loan on behalf of whichever secured lender has appointed him or her. They can do this by keeping the business going or by selling the asset against which the debt is secured. However, they cannot call on any other company assets to satisfy the debt.
A liquidator’s job is to wind up the company, sell or dispose of the assets, and use the money raised to satisfy the debts in a specific order.
Preferential creditors such as staff and the Revenue Commissioners and secured creditors, take precedence over unsecured creditors.
When it comes to secured creditors, the practise is that prior claims take priority. In other words, the first bank to give the company a loan secured against a given asset gets first call on the proceeds of a sale, followed by the second, third and so on. However, in the case of property companies such as Zoe, any insolvency process could have to deal with disputes over which bank takes priority, and the more complicated issue of cross guarantees.
This is where part or all of one asset is used as security for money borrowed either to purchase another property or for some other purpose. This was a common practice in property deals during the boom, and could spark competing claims from the banks.The two companies at the top of the Zoe pyramid are Vantive Holdings and Jersey-registered Morston Investments, which is a shareholder in Vantive, along with another Channel Island firm.
The other companies involved in the examinership proceedings, Villeer, Peytor, Carragh, and Parlez International, are subsidiaries. Vantive, Peytor, Villeer, Carragh and Parlez, all owe debts to a series of banks, which are secured against properties in the Castleforbes-Upper Sherriff Street area on the north side of Dublin’s docklands.
