Moves to wind up Zoe group go to High Court on Monday

MOVES to wind up companies in Liam Carroll’s insolvent property group, Zoe Developments, are to come before the High Court on Monday.

Mr Justice Frank Clarke yesterday postponed hearing applications by ACC Bank to confirm the appointment of a liquidator to Vantive Holdings and Morston Investments to allow time for Zoe to consider a Supreme Court appeal over his refusal to appoint an examiner to seven companies in the group.

Delivering his detailed ruling yesterday, the judge said he had rejected Zoe’s application for examinership because the companies did not have a reasonable prospect of survival both collectively and individually.

Zoe’s claims that the group was commercially viable were “at the further ends of optimism”, the judge remarked. He acknowledged that Zoe itself had admitted the fate of the 51 companies which comprise Zoe were intertwined and the winding up of the two key companies as sought by ACC Bank could lead to the collapse of the entire group.

Mr Justice Clarke described Zoe’s reliance on interest rates remaining at 1% over the next three years in drawing up a survival plan as “a very significant flaw”.

Instead, the judge said there was a very high probability based on expert evidence that there would be a significant higher interest rate environment by 2010 and beyond.

As a consequence, he expressed doubt that Zoe would be able to meet its loan repayments at the end of its current two-year moratorium on interest payments in December 2010. He said a 0.5% increase alone would add €4m to Zoe’s annual interest bill.

Mr Justice Clarke also voiced scepticism about Zoe’s claims that it had arealistic prospect of enjoying an increase in rental income over the same period.

Such suggestions were “speculative in the extreme,” given the state of the property market, remarked Mr Justice Clarke.

He said figures provided by an independent accountant, David Wilkinson of KPMG, who he had severely criticised on Thursday, had “somewhat flattered” Zoe’s position.

Mr Wilkinson’s rescue plan had exaggerated the true level of rental income which Zoe could expect to obtain, said the judge. The group would only be able to recover less than 90% of its due interest repayments rather than the 111% projected in the survival plan.

Mr Justice Clarke claimed an explanation offered by Zoe to justify such figures was “untenable”. Values placed by Zoe on its assets were higher than they were likely to be in reality.

He also noted that Zoe had switched the focus of its survival plan from its first unsuccessful application for examinership in July from the sale of its assets to its ability to make loan repayments during the second application.

On NAMA, the judge said more than 50% of the group’s banking debt could be covered by the Government’s “bad bank”. However, he observed that it was impossible to speculate how NAMA would treat such loans, although it was unlikely to be different from ordinary commercial banks in that it would try and recover as much money as possible.

Mr Clarke adjourned winding up petitions sought by ACC Bank, which is owed €136m by the group, until Monday afternoon.