A HIGH Court judge has refused to continue court protection to companies in Liam Carroll’s Zoe building group after rejecting as “fanciful” and “lacking in reality” the group’s survival proposals.
The judge criticised the proposals saying they were heavily dependent on a greatly improved property market which suggested the companies could turn a €1 billion deficit into a €290 million surplus within three years.
Mr Justice Peter Kelly granted, “with misgivings”, a stay on his refusal pending an appeal to the Supreme Court on Tuesday.
He also expressed the view the proposed survival scheme for the six companies (on whose fate many of the other 51 companies in the Zoe group depend) “seems envisaged to help shareholders whose investment has proved to be unsuccessful”.
That was not the objective for which the examinership legislation was envisaged, he said.
All of the group’s major banker creditors and the Revenue adopted a neutral stance towards the examinership application but ACCBank, which prompted the protection petition by demanding repayment of €136 million loans in June, signalled after yesterday’s judgment it may yet move against the companies if the judge’s decision stands. The companies produced the three-year survival plan after meeting the banks last December and securing agreement of all the banks except ACC.
The petition for protection was brought by Vantive Holdings which, with Jersey-registered Morston Investments, are the parent companies of about 50 companies known as the Zoe group. It arose after four companies — Villeer Developments, Peytor Developments, Carragh Enterprises and Parlez International — were presented with demands from ACC for the repayment of loans.
Refusing protection, Mr Justice Kelly dismissed as “lacking in reality” the view of an independent accountant Fergal McGrath (whom the judge noted is a member of the group’s auditors LHM Casey McGrath) that the companies could achieve “a remarkable turn around” within three years from insolvency to emerging with a surplus of some €300 million.
He noted the survival scheme involved proposals to enhance site values through planning permission, the building out and development of existing sites and the aggressive marketing of completed residential, commercial and retail units. It was claimed this would generate “a significant surplus” to fund future development.
It was notable, since the business plan was initiated last December and the banks had paid off its ordinary trading creditors “except, notably, the Revenue”, and with an “aggressive marketing and competitive policy”, only 39 residential units had been sold, notwithstanding the huge size of the developments carried out.
The judge said the proposed survival scheme was most unusual as it would not require any investment in the companies or a write-down of debts. One or both such elements figure in practically all schemes relating to companies in examinership, he noted.
No investment was required because the banks would continue to provide funds towards development and no write-down was envisaged because the banks were the only creditors, he noted.
In all the circumstances, he was not satisfied the companies had a reasonable prospect of survival.
Even if satisfied, he would exercise his discretion to refuse protection as there was “something artificial” about what was proposed.
The judge noted the number of direct employees was about 100.
Another figure of 650 mentioned largely comprised of subcontractors he said.
Earlier, the judge noted the six companies were part of a “Byzantine corporate structure” and their three directors were Mr Carroll, David Torpey and John Pope who respectively held 203, 166 and 62 company directorships.
