Sunday 20 January 2019

Government does nothing as time runs out for firms

Developer Liam Carroll will find out today if his property empire has been granted court protection politicians
against his creditors in the form of an examinership order.
Developer Liam Carroll will find out today if his property empire has been granted court protection politicians against his creditors in the form of an examinership order.

TODAY developer Liam Carroll will discover if six of his companies, and by extension his property empire, will be granted court protection.

The examinership application was triggered by a threat by ACC Bank to wind up the companies unless it was repaid €136m owed to it.

Such a move could trigger the collateral collapse of Carroll's 50-strong Zoe Group of companies.

The immediate nuclear threat by ACC receded over the weekend when the Dutch-owned lender adopted a position of "guarded neutrality" to the appointment of an examiner.

This apparent U-turn should not be interpreted as a conciliatory lifeline to Carroll, who owes his banks more than €1.1bn.

The solo run against developers by ACC, which has less than a 2pc share of the Irish banking market, could have fatal consequences for the country's builders.

It could also, if liquidation or a failed examinership leads to a catastrophic fire sale of assets, undermine the operation of the National Assets Management Agency (NAMA).

Last week ACC revealed its modus operandi when it stated that it could find itself at a disadvantage under the auspices of NAMA.

The comment was disclosed as ACC opposed the appointment of an examiner to Tivway, part of the Fleming construction group, which is nursing more than €1bn in debts.

The Government hopes to have NAMA on the statute books by November and start receiving loans by Christmas. But this could be too late for Carroll and other developers who have sought refuge in the Four Courts.

Last week the Fleming Group, via its subsidiary Tivway, successfully obtained the temporary protection of the courts despite complaints that it was not a trading company and had no reasonable prospect of survival.

ACC argued that there was an air of unreality and commercial folly to the examinership application, but Tivway implored the court to consider the domino effect of a refusal: the knock-on collapse of the Fleming group and the loss of at least 650 jobs.

Despite ACC's apparent climbdown, Carroll faces an uphill battle today. He must satisfy Judge Peter Kelly, who previously described Carroll as a "recidivist criminal" in a 1997 health and safety action, that the six companies, in whole or in part, have a reasonable prospect of survival as a going concern.

Even if Carroll establishes they have a reasonable prospect of survival, Judge Kelly has discretion to refuse to appoint an examiner.

In Tivway, the main creditor, Anglo Irish Bank, supported the application. Yesterday, Carroll's main creditors, including AIB, which is owed €489m, adopted a neutral position. Significantly, none supported it.

In Tivway, two secret investors offered an equity investment, a factor which gave added weight to an examiner being appointed. It is not known what, if any, equity is available to Carroll.

The purpose of an examinership, which offers troubled companies a maximum 100-day refuge from their creditors, is to save companies and jobs.

The courts tend to lean in favour of granting protection and approving a survival scheme -- the vital second leg of the examinership process -- where the business and the jobs dependent on it are likely to be saved.

But the quality of the courts' mercy in examinership cases is becoming increasingly strained.

Judge Kelly, who presides over Ireland's Commercial Court, has recently complained about companies being placed on life support with no prospect of survival.

Investors, crucial to the survival of many enterprises, are now as scarce as hen's teeth, said Judge Kelly, who has also highlighted the high failure rate of examinerships.

During the boom times, examinership -- with a 90pc success rate for those companies that qualified for it -- was a hugely successful means of corporate recovery. Now, less than one in three companies survive the court reprieve and judges are reluctant to grant protection where they feel that a company is incapable of survival as a going concern.

Just yesterday Cork City Football Club, which had qualified for examinership, was wound up over its tax debt.

Judges are doing their best in individual cases to balance the legitimate legal entitlement of banks and other creditors with the need to protect the wider economy.

But economic policy is not the function of the judiciary. That is the job of elected politicians who have refused to return to the Dail in August to debate NAMA, a move that could lead to the early enactment of the law.

This week the Government will publish the draft NAMA legislation, but it will be Christmas before it is operational.

Even if Carroll succeeds today, there is no guarantee he will survive examinership before limping his way, as the Government hopes, into NAMA.

The clock is ticking. Time is a luxury our politicians can not afford.

Today's news headlines, directly to your inbox every morning.

Don't Miss