DUTCH-OWNED ACCBank has claimed the Irish property market may not recover for at least a decade in fresh evidence it presented to the High Court opposing a second bid for protection for Liam Carroll’s beleaguered Zoe group.
The court heard that evidence in support of the group’s survival showed mainstream economists believed the economy would reach the bottom of the cycle in 2010 and start to recover in 2011.
However, a report by University College Dublin economist Morgan Kelly, submitted to the court by ACC, said property values may only recover to less than half of their peak values and remain there for a decade or longer.
The findings of Prof Kelly’s report were disputed by counsel for Mr Carroll’s group, who said most economists expected some form of recovery by 2011. Mr Carroll’s group yesterday began a second unprecedented bid for court protection, seeking the appointment of an examiner to seven grossly insolvent companies.
The group is seeking court protection from liabilities of €1.35 billion, arguing an improvement in the property market could increase the value of its properties from €644 million based on distressed sales over six months to €1.2 billion over three to five years. The group argues it has a reasonable prospect of survival based on a three-year plan supported by its main creditor banks.
ACC is opposing the petition and seeking the appointment of a liquidator to two of the companies over unpaid loans of €136 million.
A report by accountants KPMG supports the Zoe group’s claim for survival, saying its assets could be worth €1.36 million over three to five years, which would cover its liabilities and leave a surplus of €10 million. KPMG said the Government’s “bad bank” plan to remove problem development loans from the banks could be positive for the group.
The court heard Prof Kelly predicted property price falls to be “large and prolonged” with values possibly returning to mid-1990s levels of about one-third to one-half of peak values. Michael Cush SC, representing the Zoe group companies, said Prof Kelly was “much more pessimistic” than other economists and the group had responded to his claims in full. Mr Justice Frank Clarke noted Prof Kelly had been “laughed at” in 2007 when he predicted property prices to fall by up to 50 per cent. Prof Kelly was “almost right”, the judge said
A report submitted by ACC from estate agents DTZ Sherry FitzGerald said the commercial property market may not recover for two years. However, evidence submitted by the Zoe group from auctioneers CB Richard Ellis and Hooke MacDonald showed the market was “not on its last legs” and there had been “a noticeable pick-up”. The court heard Bank of Scotland (Ireland) was the only lender to state it believed the group had a reasonable prospect of survival and Bank of Ireland and KBC Bank Ireland were the only institutions whose interest bills are being paid in full.
The group has an annual income of €40 million from rent on its properties and dividends in two publicly-quoted companies. This is sufficient only to meet 68 per cent of the interest owing to eight lenders, the court heard. The Zoe Group argued it could more than meet its interest bill by 2011 and return to solvency in 15 months’ time if its companies secured court protection and continued to be supported by banks.
State-owned Anglo Irish Bank has agreed to advance the group €68 million for new offices in Dublin docklands. The group’s survival plan is also contingent on the sale of 375 residential properties and 103 already sold or on which sale agreements have been reached.
It has emerged Mr Carroll and his wife Roisin have personally guaranteed loans of €34 million to two of his groups. The couple guaranteed loans of €10 million from Bank of Scotland (Ireland) to the Zoe group and €24 million to Mr Carroll’s Dunloe Group to secure finance to repay trade creditors earlier this year.