Carroll’s future back in hands of the court
It follows last week’s successful application by the companies which form part of Carroll’s main construction group, Zoe Developments, to get High Court approval to bring a second petition to seek the court’s protection for them through the appointment of an examiner.
The move was taken to prevent ACC Bank seeking the appointment of a liquidator and receiver to the various companies in order to recover a €136m loan to the group.
The second attempt came after Carroll failed to convince both the High Court and (on appeal) the Supreme Court in a similar case earlier this summer of Zoe’s commercial viability in the face of the worst recession to ever hit the Irish construction industry.
Both courts had criticised the group for failing to provide any evidence about the willingness of several financial institutions to continue to provide finance to Zoe through its trading difficulties in the current economic climate. Letters of support from AIB and Bank of Scotland were described as vague in terms of commitment.
Concern was also expressed at Zoe’s failure to provide any evidence to support its claims that there would be an upturn in the property market over the next few years.
During the original application, Carroll had placed much reliance on a three-year business plan, which it is claimed will see Zoe turn a current deficit of €1.1 billion into a €300m surplus within the space of three years.
However, the controversial rescue plan was not submitted in evidence because Carroll didn’t want such highly sensitive commercial information being placed in the public domain. Lawyers for Zoe claimed last week that it was now accepted that it was a mistake to have withheld such a crucial piece of evidence from the courts.
Next week, the group will ask that any evidence relating to the business plan is held “in camera”, although it also conceded that it is prepared to allow such information in public if the High Court rules against hearing it in private.
Yesterday, lawyers for Zoe also said they would be willing to provide the individual valuations on Carroll’s property portfolio – which is estimated to be worth €1.2 billion in total – to ACC on a confidential basis.
It would not be surprising if there were major efforts behind the scenes by Zoe in the interim to get the banks to give more formal commitments about their willingness to provide future funding to the group.
In addition, the High Court this time is likely to hear additional evidence not available during the first hearing from employees, sub-contractors and other creditors of Zoe who also support the appointment of an examiner to the group.
A decision to grant examinership will provide the companies with protection from creditors for a period of 70-100 days to allow them to prove that they have a commercial future and should not be wound up.
The lengthy legal battle, however, has already granted Carroll some vital breathing space as the delay in reaching a final verdict on Zoe’s future means the developer’s bad loans are looking increasingly destined for the National Assets Management Agency.
Such a development would be largely welcomed by parties with a vested interest in a resurgent property market as it would allow Carroll’s lenders obtain better value for Carroll’s sites than a fire-sale of his assets which could result from the appointment of a liquidator or receiver.
ACC, as a Dutch-owned bank, is not subscribing to NAMA and appears to just want to reclaim as much of the money owed to it as soon as possible, much to the chagrin of Carroll and, probably, the Government.
The case has aroused major media interest because of the significance its outcome could have on the success or failure of NAMA in terms of the value it provides for taxpayers.
Whatever the outcome of next week’s case, there is every possibility that the ruling either to grant or refuse an examinership will be appealed to the Supreme Court by the losing side.
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