Asset management firm fails to have examiner appointed

THE protection of the High Court has been removed from an asset management company with projects worth €1 billion.

Yesterday, Mr Justice Brian McGovern refused to appoint an examiner, thus removing the protection of the court from creditors to First Equity because the evidence put before the court by the company did not satisfy him that the firm has a reasonable prospect of survival.

The judge made his decision following concerns about the quality of evidence and about the future prospects of the firm raised on behalf of a consortium who have invested more than €10 million with the company which manages investment projects for some 400 high net worth clients and institutional investors.

Last month, Kieran Wallace of accountants KPMG was appointed interim examiner at the petition of the company. First Equity is the business name of Gallium Limited.

The judge put a stay of 48 hours on his decision in the event of an appeal.

First Equity was established in 1995 as a corporate finance and investment vehicle by Tom Dowling, who retains 65% of the firm.

It is managed by businessman Alan Barry, who has a 35% stake. Its headquarters are in Dublin, but it has offices in London and Los Angeles.

The group sought the protection of the court and the appointment of an examiner as a result of its cash flow shortage. As a result First Equity Group cannot pay a 20-30% annual coupon on unsecured loans for a total of €10m.

Gary McCarthy, counsel for the consortium of investors who claim they are owed €10.75m, opposed the appointment of an examiner.

The consortium claimed that insufficient information was being put before the court that would allow it to appoint an examiner on the grounds that the company has a reasonable prospect of survival as a going concern.

Mr McCarthy said his clients had sought certain detailed information from the petitioner, after the application for the appointment of interim examiner was made on December 23.

He said that the petition put to the court seeking the appointment was a vaguely drafted document, and contained many “bald assertions”. Insufficient responses were received from the firm, which was why they were opposing the appointment of an examiner.

Counsel for the company Declan Murphy said that the court could be satisfied in appointing the interim examiner as examiner. He said that the interim examiners report, and that of an independent accountant showed that the firm has a reasonable prospect of survival as a going concern if certain conditions were implemented.

There had been correspondence with the investors and his clients had offered to meet with them. He also strongly denied that his clients had done anything wrong and had been fully frank in the petition.

Mr Murphy, who said that there was interest from several potential investors, said that as a going concern the company had assets of €54.3m, but owed secured and unsecured creditors a total of €52m. If the company was to be liquidated counsel said that the assets would be worth just €28m, leaving a deficit of €24m.

The company currently has 20 projects under management in Britain, the US, mainland Europe and Ireland.

The scale of its projects mean the group, as asset manager of the projects, has a requirement for funding on a day-to-day basis. The projects, include a $300m (€215m) residential and retail project in Beverly Hills, Los Angeles.

The company is also a 70% shareholder in Onslow Suffolk Limited which plans to build the world’s first indoor ski resort near Ipswich in England. The €600m SnOasis project has received significant support from the British government.