The public interest is “at the forefront” of the bid for court protection by key companies in Liam Carroll’s troubled Zoe property group, the High Court was told today as it reserved to Thursday its ruling on their unprecedented second application for examinership.
Urging the court to appoint Ray Jackson examiner, Bill Shipsey SC said the interests of the wider community had never been "so much to the fore" in any application for court protection although there was noone arguing the public interest in this case except the companies themselves.
It was of "enormous signficance" the vast majority of the group's banker creditors either supported or did not object to protection and Dutch-owned ACC Bank only got "Dutch courage" to oppose protection after the High Court rejected the first bid for examinership, he said.
While ACC was entitled to try and cut its losses, the Zoe companies and most of their banks were "not so fortunate as they have to live here and make the best of the situation".
This "unique" application was predicated on "some hope over despair" for the economy in general and for the Irish property market over the medium to long term. There was now enough evidence before the court to justify allowing the companies try and save themselves for their sakes, their creditors and employees, counsel argued.
In the 19 years since the examinership laws were introduced to save the Goodman group of companies, never before was there a case where the wider public interest was "so much to the fore".
While the National Assets Management Agency (Nama) was not in existence yet and the court could not speculate what would happen, the situation is more than 50 per cent of the group's debts are exposed to Nama, counsel added.
The aim of Nama appeared "on all fours" with proposals in the companies' survival plan to allow time for the markets to stabilise and help ensure property asset values are enhanced to the benefit of the companies and the banks. Nama might also be able to lend monies if it considered that was to its advantage.
When counsel said the situation could be likened to the second Lisbon referendum with the stakes very high for Ireland and many of the banks having come "off the fence", Mr Justice Frank Clarke, who chairs the Referendum Commission, joked he would prefer if counsel did not liken the two.
Mr Shipsey said ACC was "shooting itself" in the foot and would do better if the companies went into examinership. If the Zoe companies were liquidated, a stamp duty debt of €4.5 million to the Revenue would also rank ahead of ACC's debt, he added.
Even if UCD Professor Morgan Kelly — the "Cassandra" of the property market — was correct in predicting Irish property prices would return only to mid or late 1990s levels after a decade or more, the Zoe group had already applied substantial discounts of some 50 per cent to peak property market values of 2006, counsel also argued.
Zoe had prime sites in Dublin's docklands, "a world away" from agricultural land zoned industrial down the country, counsel said. All it wanted was a chance to try and work out a survival scheme over the next 80 days.
Remarking a bank's interest is to recover as much as possible of its debt and it "would be mad" for a bank not to go along with a scheme to that effect, the judge asked was it reasonable for the court to infer the banks' did not think this scheme was stupid but not to further infer they believed there would be a company at the end of it? Mr Shipsey said he could not disagree.
The court also heard properties charged in favour of ACC were valued at between Eu 135-153 million on the basis of December 2008 valuations for Zoe reduced by between 15-25 per cent. ACC is owed €136 million which would, with interest, increase to €143 million.
Addressing the effect of a possible rise in interest rates, counsel said rates could be fixed and AIB was offering a rate of 2.7 per cent up to 2014. A rate increase could add up to €14 million to ACC's debt. Mr Shipsey said inbuilt flexibility in cash flow projections would go a long way towards addressing interest issues. The court also heard it was intended no interest would be paid on Zoe's debt to Anglo-Irish Bank until 2014.
The three day protection hearing concluded yesterday. ACC opposes the application to appoint an examiner to seven key Zoe companies and its separate application to wind up two key funding companies in the group, listed for Wednesday, is expected to be adjourned pending Mr Justice Clarke's judgment.
Having previously indicated he would need a week to consider his ruling, the judge said yesterday he had had greater opportunity than anticipated to review the documents and would rule on Thursday.
The judge has to decide whether or not the seven companies, on whose fate the entire 51-company Zoe group depends, have a reasonable prospect of survival (RPS). The companies claim they do, based on a three year business plan supported grounded on a two-year moratorium on interest repayments on bank loans.
They also rely on economic opinion to the effect the recession will bottom out by 2010 with general recovery beginning in 2011; a modest improvement in the property market by 2011 and valuations by estate agents of some €644 million for the group's properties in a 'firesale' and €1.2 billion over three to five years.
It is claimed the group will be "balance-sheet" solvent by 2011 with sufficient income of some €40 million from property rents, sales and share dividends to meet interest repayments and provide a surplus of some €20 million assets over liabilities.
The petition is by Vantive Holdings and Morston Investments Ltd (the two funding companies for the Zoe group); Villeer Developments; Peytor Developments; Carragh Enterprises Ltd; Parlez International Ltd and Royceton. A previous petition was rejected by the High and Supreme Courts on grounds of no evidence to support the group's claim of a RPS. If liquidated, the seven companies would have some €1.1 billion liabilities, the court has heard.
