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Survival plan based on interest rate staying at 1.1pc

LIAM Carroll's survival plan failed to allow for a doubling of interest rates by the end of next year, the High Court was told yesterday.

This change would add an extra €13m to Zoe group's liabilities and endanger the company's prospects of survival, it was claimed.

Lyndon McCann, counsel for ACC bank, which is opposing court protection for Mr Carroll's Zoe group, told the court that Mr Carroll's plan quoted economist Jim Power on the near-term prospects for economic growth.

It failed, however, to include Mr Power's forecast for interest rates.

Mr Power has forecast that interest rates could double by the end of next year and reach 4.25pc by 2012 -- compared to the low 1.1pc rate assumed by Zoe's plan.

Mr McCann said that each 0.5pc rise in the interest rate would add €4m to Zoe's interest bill.

Judge Frank Clarke noted that, even if Zoe manages to secure fixed interest rates, such fixing does not come cheaply and needs to take into account future interest rate increases.

When Mr McCann added that Zoe had produced no evidence that rents would meet interest bills beyond 2011, the judge added: "Either you have no (economic) recovery or you have higher interest rates."

Meanwhile, counsel for Bank of Scotland Ireland (BoSI), which is owed €321m by the group, offered qualifications in its support for the examiner.

While expressing a belief that the plan offered a reasonable prospect of survival, its counsel added that BoSI would oppose any attempt by either Zoe or the examiner to write down what it is owed.

The court also received a hint that internet giant Google, which is a tenant in Mr Carroll's Barrow Street office development, may be paying an annual rent of around €6m.

Mr McCann also argued that Zoe failed to disclose the possible liabilities arising from one of the companies, Royceton, due to warranties it provides for work done by the group.

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He quoted from a letter from Google's solicitors to Zoe complaining about fundamental defects at its premises in Dublin's docklands, arguing that this would lead to a significant claim for rectification.

He said that this was an example of the type of liability Royceton might incur, and which could impact on the rents it was able collect from Google.

In response, Bill Shipsey, counsel for Zoe, said the problem mentioned by Google in the letter related to a lift provided by a company outside the group.

He said Zoe was dealing with the matter and that it would not affect the company.

In any case, the amount involved would be about €300,000, which would be less than 5pc of the rent, he said.

Mr Shipsey's remarks suggest that Google may be paying more than €6m a year in rent to Zoe.

Both Google and Zoe have been secretive about their rental agreements in the past.


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