Banks allege failure of ACCBank over funding hotel contract

The two banks suing ACCBank over the development of the Four Seasons Hotel in Ballsbridge, Dublin, will allege the State bank failed to put in place a secure fixed-price contract for the development's completion.

As part of the sale of ACC to Dutch bank Rabobank, the State this week gave an indemnity for any costs which may arise from the litigation. Potential costs of about £10 million (€12.7 million) are involved, though no limit applies to the indemnity, which also covers legal costs and interest.

The hotel, originally intended to be built for £51 million, cost £82 million to complete.

The two companies behind the development - Simmonscourt Holdings and Harvard Properties - were put into receivership last year by ACC, Anglo Irish Bank and Scotia Bank. Bank of Scotland Ireland, the fourth member of the bank syndicate supporting the development, was not involved in the move.

The current owners of the hotel, a partnership of wealthy business interests and professionals called the Nollaig Partnership, had a contract to buy the hotel upon completion, for £60 million.

When the developers were put into receivership, the receiver, Mr Pearse Farrell, completed the hotel by securing money from a number of parties, most notably the banks. It opened in February of this year. Bank of Scotland Ireland and Scotia Bank are now suing ACC, and ACC is fighting the claim.

A spokeswoman for ACC Bank said it would "vigorously defend" the case being made against it. She would not comment further. Mr Sean Dillon, a director of the lead developer, Simmonscourt Holdings, said a price agreement was in place.

Simmonscourt had a deficit of £7.8 million when it went into receivership, according to documents lodged at the Companies Registration Office recently.

Harvard Properties had a surplus of £93,275 when it went into receivership, according to its statement of affairs.

The statement for Harvard said it had gross assets of £52.64 million and gross liabilities of £52.55 million. Under assets specifically pledged, the statement gave an estimated value of £51 million to the hotel development and the creditor, as ACC. The bank was owed £51.9 million, leaving £849,447, which was owed to the bank but categorised as secured by a floating charge.

Other assets held by the company came to £1.6 million, including £1.2 million in the bank, and trade debtors of £403,000. The trade debtors include the Collector General, who owed £394,486, thought to be VAT re-imbursements.

Unsecured creditors include Stoneyview Ltd, a company linked to Mr Derek Quinlan, the former Revenue inspector who put together the Nollaig Partnership. Stoneyview owed £200,000. The statement of claim for Simmonscourt shows that the Nollaig Partnership owed £483,333 to the company at the time it went into receivership. The partnership is described as a trade debtor. Meanwhile, the Revenue Commissioners was owed £571,732.

The gross assets of Simmonscourt when it went into receivership stood at £491,248. Debenture holders secured by a floating charge was £7.3 million. The debenture holders were ACC Bank (£3.2 million) and Harvard Properties (£4.1 million). Work in progress, with a book value of £7.8 million, was given an estimated value of nil.

Unsecured creditors came to £387,284. The largest amount was £233,493 to Hauseman architects, of Atlanta, Georgia, in the US.

Others amounts were £34,000 to Binchys solicitors, Dublin; £23,000 to Ballsbridge Travel, Dublin; and £22,500 to KPMG, Dublin.