THE ZOE group, the property business owned by developer Liam Carroll, has been granted a reprieve until Monday afternoon to decide on a final court appeal to prevent the collapse of the heavily insolvent development body.
The High Court yesterday granted the group a stay on a ruling rejecting the group’s second unprecedented bid for court protection and the appointment of an examiner to put in place a plan ensuring its survival.
The stay gives the group a final breathing space to examine the court’s ruling in detail and consult with its main banks, lawyers and financial advisers on its prospects of appealing for the second time a rejection by the High Court.
Mr Justice Frank Clarke warned any appeal should be made within 24 hours of the hearing, which starts at 2pm. He said he was “very reluctant” to grant a stay on his order for longer than “the shortest conceivable period, if at all”, given the group had effectively had court protection for almost two months.
The judge said in his ruling it was likely more than half of the group’s bank loans would ultimately be covered by the National Asset Management Agency (Nama), the State’s “bad bank” which plans to buy soured loans from the banks.
Nama’s overall interests would be “not dissimilar from a commercial bank”, Mr Justice Clarke said.
Speaking before the judge delivered his ruling, Minister for Finance Brian Lenihan said he “very much” welcomed the decision of the courts to reject the group’s applications for survival. “They have clarified the law for us and they have certainly removed a substantial obstacle to the implementation of Nama,” he said, adding the courts would see further actions by developers.
Zoe’s reprieve has the effect of maintaining a freeze on a receiver being appointed to seize control of four group companies on behalf of Dutch-owned ACCBank, the only lender to oppose the legal action.
Two companies at the apex of the group, which owes eight banks a total of €1.3 billion, face liquidation on Monday if Zoe’s management decides not to appeal.
Talks between management and Zoe’s bankers are taking place over this weekend as six lenders to the group each prepare to appoint receivers to protect their own loans in the event of liquidation. The group’s lenders have lined up insolvency practitioners to move should an official liquidator be appointed on Monday. Allied Irish Banks (AIB), the largest lender to the group, plans to appoint Billy O’Riordan of PricewaterhouseCoopers to act as receiver for the bank, while Zoe’s second-largest bank, Bank of Scotland (Ireland), is poised to appoint David Hughes of Ernst Young.
State-owned Anglo Irish Bank is set to appoint John McStay of McStay Luby to act as receiver.
Bank of Ireland, Ulster Bank and KBC Bank Ireland will seek to appoint David Carson of Deloitte, Paul McCann of Grant Thornton and Dublin accountant Martin Ferris respectively, should ACC succeed in its attempt to appoint a liquidator to the group to recover over €136 million in unpaid loans.
John Pope, the group’s finance director, declined to comment. Sources with inside knowledge of Zoe’s position said there was little appetite for appeal given the judge’s forensic rejection of its survival plan in his 72-page ruling. However, they said the group had refused to rule out an appeal, given the “very serious consequences” of a liquidation.
Mr Justice Clarke concluded the group’s prospects for survival after a two-year moratorium on interest rates expires in 2011 were “significantly improbable”, “at the further ends of optimism” and dependent on the “virtual impossibility” of a benign climate concerning interest rates, property values and letting capabilities. The judge described the group’s second bid for protection as a “third bite at the cherry”, given it had made a different argument to the first failed petition.
