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Only one thing to do if Liam Carroll loses tomorrow: panic

The verbal characteristics of a High Court judge are usually not the most exciting. Their vocabulary tends to be somewhat understated, abstract, and fairly colourless and, if he's really good, totally obscure.

There's a reason for this. Like a good father, a High Court judge will exude an air of absolute, dull calm even in the midst of the worst imaginable crisis. When the roof is falling in and the wolf is at the door, the prudent father won't shout: "Run for your lives!" He'll gather the children round and tell them calmly about recent worrying developments and possible future difficulties. Then they can run for their lives.

So when one of the country's most powerful judges tells you that your plan to remain the biggest developer in the State is "fanciful", "lacking in reality" and contains "something artificial" the only proper response should be: panic.

And panic is exactly what High-Court judge Peter Kelly brought about last week, when he refused to extend court protection and appoint an examiner to six companies controlled by property developer Liam Carroll and his Zoe property group. But Liam Carroll isn't the only one panicking. So too are the banks, NAMA and the political establishment and, if the truth be told, the rest of us should be concerned as well.

If the Supreme Court upholds Judge Kelly's ruling tomorrow, there will be huge consequences for the National Asset Management Agency (NAMA) -- the organisation whose entire raison d'etre is to lead this country out of this current economic mess.

A liquidation of Carroll's empire will jeopardise the very process under which NAMA will value loans -- which, let's face it, is key to the success of NAMA.

A fire sale of Carroll's assets this side of NAMA being established will effectively set the market price for development assets, and this will form the basis for the writedowns banks will have to take.

It will be very difficult for the public to accept NAMA paying higher prices for other properties above what a fire sale for Carroll's sites would yield.

In contrast, if an examinership is granted tomorrow, Zoe Developments will be given 100 days' breathing space to get their house in order.

But herein lies the problem: examinerships and construction simply don't mix. The examinership process was never designed to break down such a beast. Apart from anything else, property developments by their nature need a much longer time-frame than 100 days to trade through difficulties and come out the other side.

And that's where NAMA comes in.

NAMA is a de-facto 'examinership', albeit instead of a 70-100 day respite period, it will be open-ended to the tune of at least 10 years.

Yes, it will aim to preserve the properties it takes over and bring them out at the other end in some reasonable shape or form, but NAMA's trump card is that it has access to equity.

Not alone does it have the ability to borrow up to €10bn, but already we've been told that private equity firms and public limited companies have approached NAMA in the hopes of getting in on the action of some of the sites that are set to be taken over.

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The access to equity will allow NAMA bring viable developments to fruition and allow many projects emerge from the 'examinership'.

But NAMA is now in severe danger of being overtaken by events. And if the Supreme Court upholds Judge Kelly's decision tomorrow, there'll be a whole lot of people running for cover.

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