End of the road
He was widely regarded as someone who treated workers, suppliers and customers fairly
Yesterday's app-ointment of a liquidator marked the end of the road for John Fleming's Fleming Construction Group. Once amongst the largest construction firms in the south of the country, it has now become the latest casualty of Ireland's property bust.
Paddy Kelly, Bernard McNamara, Liam Carroll. One by one the property developers who did so much to fuel the Celtic Tiger are falling by the wayside. This week, it was the turn of Cork developer John Fleming to bite the dust.
The first signs of trouble at the Fleming Group came last July when it applied to the High Court to appoint an examiner to one of its companies, Tivway. During the course of the High Court hearings, the Fleming Group revealed that it had total debts of more than €1bn.
Of this, €900m was owed to the group's bankers. AIB was the largest creditor being owed almost €300m, closely followed by Anglo Irish Bank, which had lent the Fleming Group €268m.
In its examinership application, the Fleming Group proposed a 10-year workout plan drawn up by accountants PricewaterhouseCoopers. Under the PwC plan, Fleming Group's bank debts would be split into two separate tranches.
The largest part of the bank borrowings, about €788m, would be hived off to the Fleming Group's property development arm, with the remainder, about €112m, being assigned to its operating activities, which include construction, energy and hotels -- employing a total of 650 people.
Ownership of the property development arm would pass to the banks who would attempt to recover their money over a 10-year period.
Unlike what happened in the Liam Carroll case, the High Court was sufficiently impressed with the quality of the presentation made by PwC on behalf of the Fleming Group to agree to the appointment of an examiner to Tivway. The Fleming Group seemed to have bought itself enough time to draw up a restructuring that would allow it to trade its way out of its financial difficulties.
Unfortunately it was not to be. Like Carroll, the Fleming Group had been unlucky enough to borrow money from ACCBank, now owned by the Dutch bank RaboBank, which objected to the appointment of an examiner and appealed the decision to the Supreme Court. This was despite the fact that ACCBank was owed €21.5m, less than 3pc of the Fleming Group's total bank borrowings.
In its appeal, ACCBank argued that the restructuring plan contained no commitment of continuing financial support from the Fleming Group's bankers and that it amounted to nothing more than a "personalised NAMA".
This week, the Supreme Court gave its ruling. In a decision that must have been bitterly disappointing for John Fleming, it agreed with ACCBank. The Supreme Court ruled that the Fleming Group did not have a reasonable prospect of survival. Giving the court's ruling, Mrs Justice Susan Denham wrote that the restructuring plan was no more than a "holding plan" dependent on a recovery in the property market some time over the next decade.
Even if the restructuring programme were approved, the three main companies within the Fleming Group, Tivway, John J Fleming Construction and JJ Fleming Holdings, would remain insolvent, the Supreme Court found.
"This is not a plan for the survival of the three companies as a going concern," said Mrs Justice Denham. In effect the Supreme Court was saying that there was no guarantee that the property market would recover sufficiently over the next decade to allow the Fleming Group to repay its banks.
This rulings, and earlier rulings in the Liam Carroll case, could have major implications for NAMA.
Events moved quickly after that, with the High Court appointing chartered accountant Tom Kavanagh as liquidator of the Fleming Group on the application of ACCBank yesterday.
The Fleming Group's other banks are likely to appoint their own receivers to individual properties and companies over which they hold security in the coming days.
So how did it get to this? How could one of the largest construction and property development groups in the country, with an annual turnover of about €200m, collapse into liquidation? John Fleming, now aged 58, is from Seven Heads, close to the west Cork town of Clonakilty, and was the son of a fisherman. He started what was to became the Fleming Group with little more than a tractor and cement mixer in 1975.
In the early years, he concentrated on building outhouses and sheds for local farmers.
The young Fleming quickly established a reputation for delivering quality work on time to his customers. By the mid-1980s, he was successfully bidding for public contracts, including Leap National School and the Skibbereen Water Scheme. His big breakthrough came in the late 1980s when he was one of the contractors selected to build the Glanmire bypass, one of the largest road building projects in the country at that time.
Contracting is generally a cut-throat business with little quarter asked for or given. However, Fleming was widely regarded as someone who treated his workers, suppliers and customers fairly. Many of his sub-contractors and staff have been with him from the early years and, until ACCBank intervened, had attempted to reach a settlement with sub-contractors and suppliers that would have seen them paid most of the money owed to them.
Although he was ultimately unsuccessful, he was widely respected for his efforts to ensure that his trade creditors weren't left in the lurch. "He didn't try to do the dirt on us," said one of the affected sub-contractors.
About the only fault many of those who have dealt with him identify is a certain unwillingness to compromise. "There isn't a lot of 'give' in him," said someone who has negotiated with Fleming on a number of occasions.
A lifelong Fianna Fail supporter, Fleming was close to former Agriculture Minister Joe Walsh. He is the owner of the Inchydoney Hotel & Spa, now notorious as the location of the 2004 Fianna Fail parliamentary party "think-in" at which former Taoiseach Bertie Ahern rediscovered his inner socialist.
In 2007, Fleming told the Mahon Tribunal how he had made a €6,350 donation to Fianna Fail at a fundraiser hosted by the then Taoiseach Albert Reynolds in 1994.
In common with many other contractors, Fleming gradually morphed into a property developer from the mid-1990s onwards. He accumulated large landbanks in Co Cork and, in addition to the Inchydoney property, acquired several other hotels including the Sheraton at Fota and the Limerick Radisson.
He also teamed up with another west Cork company, SWS, to build a wind-farm in Hungary. Meanwhile, his construction company branched out into pre-fabricated units that can be manufactured off-site.
However, it was Fleming's decision to enter the already over-heating Dublin property market that was to prove his undoing. In December 2005, he agreed to pay €165m for a 7.7-acre site in Sandyford. The Fleming Group planned an ambitious mixed-use development for the site, including several hundred apartments and a large retail centre. The entire project was to be topped off by the 14-storey Sentinel office building.
Today the abandoned shell of the Sentinel stands as a monument to the irrational exuberance of the Celtic Tiger years. Ironically, the money which the Fleming Group borrowed from ACCBank was to help fund the construction of the Sentinel. John Fleming has truly been felled by his lofty ambitions.