McInerney Supreme Court appeal against rescue plan refusal begins

THREE banks owed €113 million by housebuilder McInerney had adopted an approach of “simply running the business into the ground” whereas an investor wanted to help regenerate the property market and make a contribution to the Irish economy, the Supreme Court heard yesterday.

John Hennessy, counsel for McInerney, was opening an appeal by the company against a High Court decision last February to reject a rescue plan for the business.

In February, Mr Justice Frank Clarke ruled the rescue plan would be prejudicial to Belgian bank KBC and he refused to confirm it. KBC, Anglo Irish Bank and Bank of Ireland, who were owed €113m in total, had opposed examinership from the start and sought to have a receiver appointed.

Mr Justice Clarke made his final ruling in February after being asked to reconsider an earlier judgment that the plan was also prejudicial to all three banks. The judge was asked to consider new information that €80m due to the two Irish banks out of the €113m total was likely to be transferred to the National Asset Management Agency (NAMA).

In his revised decision, the judge said that even where a survival plan is unfairly prejudicial to just one creditor, it is still unfairly prejudicial.

In the appeal before the Supreme Court yesterday, counsel for McInerney, said they were arguing that Mr Justice Clarke used the wrong test in rejecting the survival scheme, that he (Mr Justice Clarke) did not specify what test he was using in his first judgment and that it had to be inferred from that judgment what the test was.

They were saying, among other grounds, that Mr Justice Clarke’s conclusions in the first judgment were wrong and that he was incorrect in finding KBC, the only “non-NAMA bank” was unfairly prejudiced in his last judgment.

Mr Hennessy said McInerney was a 100-year-old company with a proven track record in the building business with a recognised brand name and employing 109 people.

Under a survival scheme put forward by a court-appointed examiner, a private US equity fund, Oaktree Capital, proposed investing in the company, including an offer of €25m in full settlement of the debt to the banks.

This scheme would save those jobs, help regenerate the property market and bring inward investment into Ireland of at least €35m, Mr Hennessy said.

In contrast, the banks proposed to run the business over the next 11 years in which it was expected they would make present day returns of €50m but without buying any new sites or building new homes, save for those on already existing sites, counsel said.

Mr Hennessy said McInerney had been a successful business and was in the process of dealing with its difficulties last year when the “rug was pulled” from under it by the banks overnight and without warning last August.

The appeal, before a five-judge court, continues.

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