Developer in crisis as bank sues for €60m

ONE of the country's biggest developers faces the collapse of his property empire after bailed-out lender Irish Nationwide made a €60m personal claim against him.

The Commercial Court case by Irish Nationwide Building Society against developer Liam Carroll could also jeopardise government efforts to stabilise the banking system.

Legal, property and construction industry experts fear the case against Carroll, who claims he is only personally exposed to INBS to the tune of €30m, could trigger a domino effect of similar lawsuits against builders.

The worry is that such actions could lead to the closing down and bankruptcy of some major developers.

This would leave the banks, which are guaranteed by the Government, sitting on property assets with values down 50-70pc from their peaks.

The Government is putting the finishing touches to a new bill establishing the National Asset Management Agency, but there are concerns a raft of liquidations before it is introduced could undermine the agency.

However, sources said it was seen as "highly unlikely" that other banks would take court actions because the resulting losses would land on their books, rather than the loans being transferred to NAMA.

Mr Carroll is being sued personally for €60m by INBS, whose former chief executive Michael Fingleton was forced to step down following the Anglo Irish-Irish Nationwide loan "warehousing affair". INBS claims the colossal sum arose from guarantees over loans made to his company Aifca Ltd.

In its proceedings, INBS claims Mr Carroll had executed an "irrevocable and unconditional" guarantee on September 29, 2006. INBS claimed this guaranteed payment of all liabilities of Aifca up to €60m.

Mr Carroll allegedly told Mr Fingleton in late 2008 that he would be in a position to deal with €30m of the guarantee in 2009 and had also confirmed Allied Irish Bank and Bank of Scotland (Ireland) had the largest exposure arising from his developments.

A statement of affairs for Mr Carroll, and his wife Roisin, supplied to INBS on October 31, 2008, is central to the legal dispute. The statement had shown assets of €259.5m, bank debt of some €149m, annual rental income of €9.85m and annual interest of €7.9m.

But INBS has complained that despite subsequent "engagements" by Mr Carroll and his agent to provide information about other loans and valuations of Mr Carroll's properties, neither Mr Carroll nor his company had committed to making the payments due.

The proceedings by INBS against Mr Carroll and Aifca, of Upper Mount Street, Dublin, were admitted to the Commercial Court yesterday by Mr Justice Peter Kelly.

Ciaran Lewis, counsel for Mr Carroll and Aifca, said they would be contending that the guarantee under which INBS is claiming €60m had expired because a certain security was put in place, meaning the guarantee was for €30m.

On the basis of that guarantee and subject to the terms of a commercial mortgage agreement, INBS claims it granted and maintained a term loan facility to Aifca for €66.5m and that around €78.6m was now due and owing.

It claims the facility allowed Aifca to refinance loan facilities previously provided to it by Bank of Scotland (Ireland) Ltd and was also to enable it (Aifca) to purchase the share capital of Lowe Tavers (Tallaght) Ltd.

INBS claims the repayment of the loan facility was to be made on demand or within the two-year period of the loan but the monies had not been repaid.

In an affidavit, Tom McMenamin, commercial lending manager with INBS, said there was a meeting on December 28 at which Mr Fingleton met Mr Carroll and Sean Mooney of accountancy firm KPMG.

Mr Fingleton reminded Mr Carroll that the loan facility guaranteed by him had expired some two months previously.

Mr McMenamin said Mr Carroll had said he could deal with €30m of the guarantee in 2009. He said Mr Carroll had also confirmed Allied Irish Bank and Bank of Scotland (Ireland) Ltd had the largest exposure arising from his developments and he needed their support to resolve his problems.

Mr McMenamin said Mr Carroll was pressed for details of his assets and liabilities and Mr Mooney had promised to provide personal statements. A statement of affairs was later provided. Mr Justice Kelly yesterday fixed July 17 for the hearing of INBS's application for summary judgment for the amounts sought.