RECEIVERS ARE to take control of housebuilder McInerney on behalf of three banks owed €113 million after the Supreme Court yesterday ruled against a rescue plan for the business backed by US private equity fund Oaktree Capital.
The ruling ends the process that began last August when the High Court appointed Bill O’Riordan of PricewaterhouseCoopers as examiner to five of the group’s Irish firms, and lifts the protection from creditors given to the business at that point.
As a result, three banks – Anglo Irish, Bank of Ireland and KBC – are to appoint receivers, said to be accountancy firm KPMG, to the firms. The banks had proposed to regain their debt through a 10-year receivership, during which the companies’ sites would be developed and the houses sold.
Meanwhile, the board of their parent, McInerney Holdings plc, will go ahead with an extraordinary general meeting next Friday, where it will ask shareholders to place that entity in liquidation. Its British and Spanish operations have been sold and the proceeds used to pay other bank debts.
The rescue plan involved an offer of €25 million from Oaktree to the banks in final settlement of the debt. The US fund was prepared to invest up to €54 million, including the bank settlement, in the Irish business, which it believed had a long-term future.
The High Court refused to approve the proposal earlier this year as it unfairly prejudiced the interests of Belgian lender KBC.
Yesterday Mr Justice Donal O’Donnell, Mr Justice Joseph Finnegan and Mr Justice Liam McKechnie comprised the majority dismissing the McInerney appeal, while Mr Justice Nial Fennelly and Ms Justice Fidelma Macken were the dissenting judges.
The court also dismissed the banks’ cross-appeal against the decision of Mr Justice Frank Clarke to allow the High Court case to be reopened after he had decided all three banks would be prejudiced by the rescue plan.
Mr Justice Clarke revisited his decision after being told there was a likelihood the National Asset Management Agency would take over the loans to McInerney from the two Irish banks. In his final decision, he ruled, the plan would be unfairly prejudicial to KBC but, even where a rescue plan was unfairly prejudicial to only one party, it remained unfairly prejudicial.
In his 74-page judgment, Mr Justice O’Donnell said McInerney had failed to show the receivership model would not have the prospect of a return of significantly more than €25 million and also failed to show the proposals were not unfairly prejudicial to the secured creditors. The High Court was correct in concluding it could not approve the proposals, he said.
There was something fundamentally implausible in the companies’ vehement claims the receivership-controlled work out would generate a return of only €18 million – or might incur losses of €11 million, he added.
Mr Justice O’Donnell said he believed acquisition by Nama of some of the McInerney loans would involve payment to the banks of something more than present-day market value of the properties involved. The companies also failed to show KBC would not do better under that than under the rescue scheme.
McInerney’s directors said afterwards they were disappointed at the ruling. They pointed out it meant a €54 million investment that would have saved 100 jobs and resulted in a €2 million payment to trade creditors, could not now go ahead.
It was “highly regrettable that the banks were unwilling to reach an accommodation with the investor and that a company such as McInerney, capable of attracting such a substantial foreign investment in this manner, should be allowed fail,” they said.
RECEIVERSHIP THE TIMELINE
August 2010
High Court appoints Bill O'Riordan of Pricewaterhousecoopers as examiner to five companies in McInerney Holdings plc's Irish business in examinership and places them under protection from creditors.
September 2010
High Court confirms the examiner's appointment. US fund Oaktree Capital emerges as a potential investor and offers €60 million to Anglo Irish, Bank of Ireland and KBC in full settlement of a secured €113 million debt. The banks oppose the examinership.
November 2010
Overwhelming majority of McInerney creditors back O'Riordan's rescue proposals, which include a revised Oaktree offer to the banks of €25 million and €2 million for unsecured creditors. Banks propose long-term receivership as an alternative.
January 2011
Mr Justice Frank Clarke refused to approve the rescue plan as it is "unfairly prejudicial" to the banks, but then agrees to revisit this when it emerges that Nama is due to get Anglo and Bank of Ireland's share of the debt.
February 2011
Justice Clarke upholds his earlier ruling since the proposals are still unfairly prejudicial to Belgian bank, KBC, which is not part of the Nama process.
May 2011
Supreme Court hears McInerney's appeal against High Court ruling.
July 2011
Supreme Court rules against the appeal, paving the way for a receivership.
