K Club seeks to defer bank loans due to crippling losses
DR MICHAEL Smurfit and developer Gerry Gannon are facing huge financial difficulties at the K Club. They are seeking to defer repaying bank loans, amid crippling losses that are expected to continue at least until next summer.
Along with a lot of other luxury golf and hotel complexes, the K Club -- which hosted the Ryder Cup in 2006 -- is struggling amid a major reduction in consumer spending.
The complex, which includes a hotel, country club and two courses, has racked up a loss of €8.1m, with revenues plunging to €13.9m -- down from €20.3m.
The company behind the club, Bishopscourt Investments, is hoping to defer repaying a bank loan of €55m.
The company's accounts said: "Based on projections, the group expects to incur further operating losses in the period to June 30, 2011."
The accounts cover the year ended 2008, but the directors provide an update, saying the economy could prevent the company from getting further bank loans or other funding.
Dr Smurfit holds 51pc of the shares, with the remainder owned by Mr Gannon. Dr Smurfit could not be reached at his offices in Monaco yesterday.
KPMG, the auditors to the company, included an "adverse opinion'' on the company, pointing out that while the property assets at the K Club are worth €96.1m, no valuation has been done on these assets during the period, and no provisions have been made for potential writedowns.
"Information concerning comparable properties indicates very significant reduction in values have been experienced,'' warned the auditors. "In our opinion, these circumstances indicate that provision should be made for impairment in value,'' they suggested.
Not making a provision for impairment was likely to "materially overstate'' the value of the group's assets, the auditors added.
In relation to a €55m loan, the directors say they will be able "defer repayment of this loan". On the other hand, the directors stated in the accounts: "The valuation of the group's fixed assets cannot be reasonably established at December 31, 2008''. Despite the scale of the losses, the company has shareholders' funds of €18.9m.
The number of employees dropped from 293 to 239, with payroll costs reaching €7.3m.
The bank loans are with Irish institutions and become payable within a year because of a breach of covenants. Among the lenders is Irish Nationwide.
Gerry Gannon, the accounts state, has an option to buy certain development lands from the company. During 2005, Mr Gannon purchased some of these based on a valuation of the lands, at fair value, of €11m.