The High Court has confirmed the appointment of an examiner to McInerney Homes and a number of related companies despite opposition from a group of three banks owed €113 million.
In confirming William O’Riordan of PricewaterhouseCoopers as examiner to McInerney, Mr Justice Frank Clarke also ruled that the examiner must address a number of issues of concern to the court by October 1st, or the process, opposed by the syndicate of three banks, could be terminated.
In seeking Mr O’Riordan’s appointment, McInerney claimed it was “an ideal candidate” for the examinership process on grounds including that an Independent accountant’s report stated the firms have a reasonable prospect of survival.
However Bank of Ireland, Anglo Irish Bank and KBC opposed the move. They said they would not support any rescue plan for McInerney as they did not believe it would work.
In his ruling, Mr Justice Clarke said that while it was possible at this stage to conclude that the firms have a reasonable prospect of survival, he was putting in place the unusual step of having the examiner prepare a report to deal with a number of areas of concern.
McInerney, he said, had recorded losses of €160 million due to a downgrade in its assets which represented a major hole in their accounts. The judge said he believed there were three possible ways in which the company could be saved.
The first he said was if the banking syndicate, through the examinership process, could come to an arrangement with the companies and the investor.
Secondly, the existing banks could stay on as lenders to the companies against their wishes or thirdly, he said that a new bank or syndicates could take over the existing loans at a reduced amount.
However, the judge said that he could see a number of problems with these three scenarios.
Mr Justice Clarke said he wanted “a clear view from the examiner” in his report if there was any reality to the banks, McInerney and their investors negotiating a settlement.
He said the report must also address if alternative banking arrangements can be entered into and if there are any legal impediments preventing the banks from being forced to stay on as lenders to the firm against their wishes. He said the continuation of the examinership process depended on what was contained in the report.
Mr O’Riordan was confirmed as examiner to McInerney Homes Ltd, with a registered address at Cleaboy Business Park, Waterford and four related companies: McInerney Holdings Public Limited Company; McInerney Construction Holdings Ltd; McInerney Contracting Ltd and McInerney Contracting Dublin Ltd.
Should the process be allowed continued, Mr O’Riordain he has until the end of November to put together a scheme of arrangement that will ensure McInerney’s survival.
In seeking Mr O’Riordan’s appointment McInerney claimed that as well as the independent accountant’s report an investor, US private equity group Oaktree Capital, was ready to invest €40 million in the group. In addition, a business plan had been prepared which predicted modest growth in the housebuilding sector that McInerney specialised in over the next five years.
The companies sought to be put into examinership after being informed by their banks that they would not be allowed to retain any proceeds of house sales, even for the most basic of working capital requirements, and that its over draft was being cancelled.
It was the companies’ view that the banks made that decision because Nama directed them to do so. That decision affected their cash flow and made it very difficult for McInerney to trade. McInerney was unable to have the overdrafts restored.
The banking syndicate had opposed the companies being allowed enter into examinership, describing such a move as “a raw deal,” from their perspective. They were not prepared to fund the companies in the future and stated they would rather take their chances and have a receiver appointed to the group.
McInerney, which started off building homes in the west of Ireland in 1909, currently has operation in the UK and Spain as well as Ireland. The company, which employs 100 people, had been profitable but due to the severe downturn in the construction industry began to incur losses.