O’Flynn to challenge Blackstone in court

Developer Michael O’Flynn is due to go to court today to counter US private equity fund Blackstone’s bid to take control of his property and construction business.

Blackstone bought €1.8 billion in loans relating to the O'Flynn Construction Group from Nama in May, giving it the right to call in the security for those debts, that is, its properties and companies.

Following an application from Blackstone affiliate Carbon Finance earlier this week, the High Court appointed an interim examiner to four of the group's operating companies.

At the same time, it appointed receivers to other O’Flynn assets on foot of personal loans to the developer and his brother John whose repayment it sought on Tuesday.

It is understood Mr O’Flynn will go the High Court today to seek orders restraining Carbon Finance from proceeding with this and halting the examinership.

Following Carbon’s application on Tuesday, he indicated that he was considering legal action in response. His lawyers are likely to outline the reasons why he and other shareholders believe the US fund’s actions should be overturned.

As Carbon was only seeking to have an examiner appointed on an interim basis, it was the only party in court and neither Mr O’Flynn nor the group’s other shareholders were represented.

Mr O’Flynn issued a statement describing Blackstone’s actions as aggressive and saying they had taken him by surprise. He said all the debts involved were fully serviced and the repayments up to date.

In its petition, Carbon said the O’Flynn group’s directors and shareholders had not co-operated with it since it took over its loans from Nama in May and had not provided audited accounts for the organisation for 2013.

Blackstone issued its own statement yesterday, saying it had taken appropriate steps to protect the interests of stakeholders and the ongoing business of the O’Flynn Group.

“Blackstone remains committed to supporting the business of the O’Flynn Group and, in particular, to preserving jobs through an investment program across the Group’s real estate portfolio,” it added.

The High Court installed Michael McAteer of Grant Thornton as interim examiner of O’Flynn Construction Company, O’Flynn Construction (BTC), O’Flynn Construction (Rochestown) and Eastgate Developments (Cork).

The move gives the court ultimate control of those businesses until such time as they emerge from the examinership process, which could take up to three months.

Carbon Finance claimed that the group was either insolvent, or would be when €235 million of its debt fell due for repayment at the end of the year. It argued that its overall debt needed to be restructured and that it required a €16 million cash injection.

The fact that it is in examinership opens up the possibility that parties other than Blackstone, Carbon Finance or the group’s shareholders could bid for the businesses, but it is also likely that any such parties would also have to take on the debt over which the US fund has control.