ACC Bank is expected to apply to the High Court shortly to wind up three companies in the Fleming building group, which has debts of more than €1 billion, after the Supreme Court today refused to continue court protection for the companies.
The five judge court unanimously ruled that schemes of arrangement proposed by the examiner for the three companies were essentially a plan to put the companies into "a holding pattern for ten years" and did not demonstrate a reasonable prospect of their survival as a going concern.
The scheme related to John J Fleming Construction, JJ Fleming Holdings and Tivway and proposed a sale of the group’s contracting arm and other assets to a new company, Donban, for €3.6 million.
It also meant secured bank creditors would have effective control of Fleming's property development business, which has a number of connected sites in Sandyford, Co Dublin, with the banks having 10 years to realise their security.
Ms Justice Susan Denham said, under the proposed schemes, the three insolvent companies would remain insolvent. The schemes provided essentially for selling off the productive part of one of the companies - John J Fleming Construction - and keeping a land bank of sites for ten years in the hope the property market might recover and the banks would support a build out within that time, she said.
While it was entirely understandable the companies would wish to hold on until there is an upturn in the property market, the Companies Act provided protection could only be granted to a company if the court was satisfied it had a reasonable prospect of survival as a going concern. These companies had not demonstrated they had.
Justice Denham said the schemes envisaged a holding situation with the companies akin to three aircraft hovering over the property market for ten years. Then, if the property market improves and, if the companies had the support of the banks, they would be permitted continue business, she said.
If the property market did not improve and the banks did not provide support, the companies would land in ten years with the scrappage divided.
"This is not a plan for the survival of the three companies as a going concern," she said.
She also noted, even if the schemes were approved, just 15 employees would remain with the construction firm. Of the 137 employees now with construction, the schemes had proposed 85 would go to Donban while 37 others were on secondment to other companies being bought by Donban, she noted.
In those circumstances, and because the three companies would remain insolvent, the issue of employment was not a significant factor in this case.
The survival schemes were approved by Mr Justice Brian McGovern in the High Court last November but ACC Bank, which opposed the schemes, appealed the decision on grounds including it prejudiced the bank's ability to recover some €22 million owed to it by the Fleming Group. The schemes were put on hold until the Supreme Court's ruling was given.
The Cork-based Fleming group has debts of some €1 billion, including €260 million to Anglo Irish Bank. It also has liabilities to AIB, Bank of Ireland Scotland and hundred of unsecured creditors. With the exception of ACC, all were in favour of the schemes.
Paul Sreenan SC, for ACC, had argued the scheme was "artificial" and effectively a receivership. Lawyers for the three Fleming firms, examiner George Maloney and Anglo Irish Bank, rejected ACC's claims that the proposed schemes amounted to a "personalised NAMA".
The schemes were on hold until the Supreme Court's ruling was given.
