Irish

Thursday 21 August 2014

Provisional liquidator for company linked to CHC

Aodhan O'Faolain and Ray Managh

Published 03/01/2013 | 05:00

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THE High Court has appointed a provisional liquidator to a property investment firm related to the failed investment firm Custom House Capital.

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The directors of Custom House Capital Investment Property Fund Plc, which the court heard had invested in properties through two separate funds, sought the move in order to prevent two German banks from conducting a firesale of the firm's assets. The assets in question are two large properties in Germany and Paris, France.

The directors fear the properties, worth around €148m, may be sold by the banks at a value far below what they are worth to the detriment of the company's shareholders.

Yesterday at the High Court, Judge Roderick Murphy appointed insolvency practioner Billy O'Riordan of PricewaterhouseCoopers as provisional liquidator to the firm.

"The urgency" of the matter was "clear" given the "concerns expressed by the directors", the judge added.

The investment manager and promoter of the company was Custom House Capital (CHC). CHC was put into liquidation in 2011 after inspectors found more than €56m of client money had been misused to cover shortfalls on property investments in what was described by a High Court judge "as a sort of Irish Ponzi scheme".

CHC managed more than €1bn of funds for 1,500 clients.

John Gleeson, a barrister acting for Custom House Capital Investment Property Fund's directors, said his clients had intended to seek to have a liquidator appointed by the court later this month.

However, there was now considerable urgency in the matter after the German banks, which hold security over the European properties, indicated an intention to dispose of the properties or appoint a receiver over them "some time in early 2013".

Catastrophic

The directors now feared that the banks may sell the two properties at what would be "a catastrophic loss", counsel said.

Counsel said that the company had been effectively suspended by the Central Bank more than a year ago.

Due to the regulatory restrictions imposed, the directors are unable even to seek to renegotiate the loans or seek additional finance with the German banks. A liquidator, if appointed, would be able to negotiate with the German banks about the loans, counsel added. Such a move would give investors confidence and would "preserve the status quo".

Counsel said the directors were put in place, with the approval of the Central Bank, after CHC resigned as the company's investment manager and promoter in October 2011.

Horwath Bastow Charleton Wealth Management (HBCWM) took over as managers and appointed the directors, who have conducted a detailed review of the company.

They had determined that there was a serious information deficit in the financial and regulatory affairs of the company. No proper register of shareholders in the funds seems to exist.

The directors, counsel said, had come to the view that it was not possible to resolve all the problems they have identified, and say that winding up the company is the best and most cost-effective way forward.

The company's investors had voted in favour of the company being liquidated, counsel added.

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