Taxpayers will bear the cost of McInerney's debt to state banks
Taxpayers look like being one of the losers from the decision of quoted company McInerney to apply for examinership.
Anglo Irish Bank and Bank of Ireland are both key lenders to the housebuilder and their debts are unlikely to be honoured in full no matter what happens from here on in. McInerney has €240m of debt in total and the Irish banks are believed to be owed €111m of this, split between Anglo and Bank of Ireland.
If McInerney emerges from examinership and it's a big if, the banks will take significant write-downs on their loans, otherwise the examinership is pointless.
Equally if the examinership does not get approval and the firm goes into liquidation or receivership, the banks will lose that way too because the assets of the company will in know way cover these debts.
The added complication is that the National Asset Management Agency (NAMA) is likely to soon own the McInerney loans, but what price should it pay for loans belonging to a company in examinership/liquidation or receivership? Not very much is the answer. The precise discount it should apply to the McInerney loans will take some time to work out.
Either way, the McInerney case highlights for the first time the evolving influence of NAMA in Irish banking.
A restructuring plan for the company, for instance, had to be submitted to NAMA over recent weeks and while NAMA has no say over one of McInerney's lenders, KBC, it does have a huge say in what Anglo and Bank of Ireland do.
Despite NAMA's huge influence, the agency is believed to reject the charge by McInerney that it in some way halted overdraft facilities for the company. While some reports suggested that NAMA is against examinership, the actual outcome is that NAMA will simply have to sharply discount the McInerney loans before they move over. It is understood they have not moved over yet, still allowing NAMA time to react to the latest developments.
McInerney has been on decidedly shaky ground for some time before seeking the appointment of an examiner to the firm, whose history dates back 100 years.
McInerney owns about 4,500 plots in Ireland and a further 2,400 in the UK. With debts of €236m, about €111m of that has been earmarked for transfer to NAMA, with the toxic bank expected to take over about €83m of those loans by the end of this year.
In its last financial year, McInerney posted a loss of €25m and pre-exceptional losses of €47m in 2008. It also wrote down the value of its landbank by half in Ireland, recording a €156m impairment last year.
The descent into the ranks of the corporate underclass marks a stark turnaround for the company that made its debut on the stock market in November 1971, as McInerney Properties.
It was the largest ever public flotation of an Irish company at the time. By the 1980s it had expanded its operations to the Middle East and Spain, while being involved in the construction of the International Financial Services Centre in Dublin.
As for other construction firms, the property boom in Ireland was manna for McInerney and as its coffers bulged it splashed out, buying a home builder's in the UK.
But by September 2005 there were chinks in the armour. Even as Quinn Direct revealed it had acquired a more than 4pc holding in the listed company, that month McInerney was assuring investors that its order book was bulging, despite a lacklustre six-month performance.