ANALYSIS:LIAM CARROLL's Zoe group was facing a deficit of €900 million if ACC Bank successfully appointed a receiver or liquidator next week in an attempt to recover loans of €131 million owed to the bank.
Instead, Carroll took a pre-emptive strike yesterday to stop the impending action by ACC, which could have toppled his group.
The Dutch-owned bank is one of eight lenders owed a total of €1.2 billion by the Zoe group, but it was the only bank not supportive of the group’s efforts to trade out of its mammoth difficulties. Unlike the other lenders, ACC would not forgive interest on loans and instead demanded repayment.
Six of Carroll’s companies received the protection of the court yesterday afternoon as soon as they presented a petition to the central office of the High Court.
The protection initiates a process that will probably lead to the appointment of an examiner, Kieran Wallace of KPMG, on Monday, July 27th, when the case is before the High Court again.
The cloak of protection buys Carroll time and gives his group breathing space to complete projects, apply for planning permission for existing sites and, the group hopes, repay its banks.
If the court protection leads to the appointment of an examiner, this will be the biggest examinership in Irish corporate history in terms of the size of the debts.
And this is only part of Carroll’s overall business empire – the court protection was provided to six of 51 companies within what is “loosely and colloquially known as the Zoe group”, the court heard.
Carroll’s other prominent company, Danninger, falls under the Dunloe group, another part of his business empire which lies outside the protection of the court.
During the court hearing, Bill Shipsey SC, who presented the application for protection with law firm Eversheds O’Donnell Sweeney, outlined the scale of the debts. He said, with a hint of irony, that the €131 million debt owed to ACC Bank was “relatively small” in terms of the overall indebtedness of the Zoe group.
Mr Justice Frank Clarke was told that the court’s protection was only sought for six Zoe group companies which had a direct or indirect exposure to ACC Bank.
The court heard that the other seven banks financing Carroll’s group supported the application, which was “a precipitative action” to stop ACC’s “attack”.
The banks, with the exception of ACC, had met on Thursday afternoon and agreed to support the group’s bid for court protection and survival.
Shipsey said the group had a business plan, devised last January to February, to finish developments, secure planning for untouched sites and sell assets to repay the group liabilities in full.
Shipsey said the firms hoped – “and it can be no more than a hope and desire”, given the state of the property market – that there would be no writedown of loans.
ACC had threatened court proceedings in Jersey, where Carroll’s holding company, Morston Investments, is based, to appoint a receiver or liquidator over its debt.
Last month the bank demanded repayment within 21 days of the two loans: €62 million provided in August 2007, and €69 million in January 2008. The notice was due to expire next Monday, so Zoe was forced to act fast to stop ACC.
Shipsey said the group faced what was known as “desastre” proceedings, a form of insolvency action, through the Jersey courts if ACC was not repaid its loans
ACC, directed by its Dutch owner Rabobank, has aggressively pursued outstanding debts in recent months. The bank is the third-largest lender to Zoe.
Allied Irish Banks has the biggest exposure; it is owed 40.8 per cent of the €1.2 billion overall debt of the Zoe group, or €489 million.
The action muddies the water for the Government as it prepares legislation setting up the National Asset Management Agency. The court heard that some of Zoe’s assets may end up in Nama.
In the absence of the legislation, it is unclear what effect the examinership of one of Ireland’s biggest property developers will have on the “bad bank” plan. It will undoubtedly complicate matters.
