Shares in food group Greencore fell today in the expectation that Ulster Bank would exercise its right to sell part of troubled property developer Liam Carroll's near 30 per cent stake in the company.
Solicitors for the bank, a unit of Royal Bank of Scotland, moved yesterday to block Carroll from selling the 15.9 per cent stake he holds as collateral.
Mr Carroll, who will present a fresh application to the High Court for creditor protection for some of his companies on Thursday, needs to dispose of equity stakes as part of a survival plan to save his beleaguered property empire.
"Generally what happens in these situations is that the banks cut and run," one Dublin-based trader said.
"People have assumed that they (the shares) are going to come at a discount - below these levels - so therefore they sell in the hope of buying back cheaper."
But after losing as much as 5.5 per cent in early trade, with prices falling to €1.20, the stock gained back some of its losses throughout the morning to climb to €1.27 by close.
Mr Carroll invested in Greencore in 2006 when he spent €170 million buying up the 21.57 per cent stake held for years by financier Dermot Desmond. His Greencore stake was valued at €302.38 million after he increased his stake to 29.5 per cent in 2007. Falling more than 37 per cent in the last 12 months alone, the stake had a value of €67.90 million last night.
The move by Ulster means he will not be able to use his voting rights over these shares and the bank will also have the power to issue instructions to him in respect of those voting rights.
The court action on Thursday follows the Supreme Court’s refusal last week to overturn the High Court’s rejection of his original application for an examinership.
Ulster supported the original application but the High Court heard last Friday night that Ulster has adopted a “neutral” stance in relation to the new proceedings.
Mr Carroll, one of the biggest and most successful developers in the boom years, has been struggling to keep his business intact since ACCBank sought repayment of €136 million in loans. ACCBank, owned by Dutch lender Rabobank, secured the appointment of a provisional liquidator to two of his companies and receivers after the Supreme Court ruling.
The High Court heard last Friday night that Mr Carroll had been hospitalised and was not in a position to give instructions in the new application.
However, Zoe directors David Torpey and John Pope had passed resolutions approving the new application.
The Zoe group, with debts of €1.2 billion, has received support from Allied Irish Banks, Bank of Scotland (Ireland), KBC Bank Ireland, Bank of Ireland and Anglo Irish Bank when seeking court protection from its creditors.
Solicitors Matheson Ormsby Prentice said in a stock market filing yesterday that Ulster acquired rights over a 15.9 per cent shareholding in Greencore. The filing, which said the rights were acquired last Friday, prompted a drop of almost 6 per cent in Greencore shares.
“The beneficial holder of the shares shall not be entitled to exercise the voting rights in respect of the shares otherwise than in accordance with the written instructions of Ulster Bank Ireland Ltd,” the filing said.
Although the filing did not name Mr Carroll or any of his companies as the ultimate owner of the 15.9 per cent Greencore stake, it was immediately interpreted in high-level banking and stockbroking circles as a reference to him.
No other Greencore shareholder has a stake exceeding 11.7 per cent and a series of Companies Office filings in 2006 and 2007 show that Ulster financed Mr Carroll’s acquisition of shares in the company. Greencore declined to comment and Ulster Bank declined to comment.
It also emerged yesterday that ACCBank threatened to liquidate 10 subsidiaries of two insolvent companies in the Zoe group. Repayment demand letters sent by ACCBank to Vantive Holdings and Morston Investments said the subsidiaries were debtors of the two companies in March 2008.
Additional reporting by Reuters