ANALYSIS:ALLIED IRISH Banks (AIB), the biggest lender to Liam Carroll's property development business, is owed more than €550 million by his Zoe Group of companies but the debts are protected by one of the lowest forms of loan security.
The bank will ask the Commercial Court on Monday to accept legal proceedings against five Zoe Group firms for a later hearing in what is essentially a bid by AIB to bolster the security on its debts, further protecting its interests.
The purpose of AIB’s actions is to secure a better form of security for the loan facility of more than €550 million by securing “well-charging orders” from the court, confirming the bank’s interest in the group’s lands and buildings.
As it stands, the loans are secured on equitable mortgages by way of letters of undertakings from the companies’ solicitor – Cathal N Young of Dublin law firm O’Reilly & Co – or title deeds held by the bank for properties owned by the companies.
Equitable mortgages are regarded as among the weakest forms of security when it comes to a bank protecting its loans.
As part of AIB’s legal actions, the bank is also seeking to appoint a receiver to seize control of various properties, putting the bank in a position to manage rents from the buildings to service the substantial loans owing by the group.Mr Carroll’s Zoe Group collapsed last year after it failed to secure court protection from debts of more than €1.3 billion.
The bank is seeking to enter proceedings against five Zoe Group companies before Mr Justice Peter Kelly in the Commercial Court.
Given that the Zoe Group owes a further €750 million to seven other banks, improving the security on the loans may protect AIB’s interest ahead of other lenders.Banks normally seek declarations that loans are “well charged” on assets in enforcement cases.
The companies being sued are the largest developments firms in the Zoe Group – Danninger, Eppo Developments, Fabrizia Developments, Oze Construction and North Quay Investments.
The bank has already appointed a receiver, Billy O’Riordan of PricewaterhouseCoopers, to Zoe Group companies.
AIB’s action, if successful, will allow the bank to seize control of more Zoe properties.
Among the properties at the centre of the case are buildings on Barrow Street in Dublin 4, Loreto Abbey in Rathfarnham, the Island in Chapelizod, the Barley House in Cork Street and properties on South Lotts Road and Charlotte Quay in the Dublin docklands.
