Friday, July 31, 2009
The plan involved “extraordinary” forbearance by the group’s banker creditors in agreeing to a two year moratorium on interest payments and effectively refraining from calling in massive loans. This forbearance was “remarkably absent” when the banks were dealing with smaller borrowers, he remarked.
“In truth the banks can do little else but forbear because if they take action to recover the monies due to them by these companies, they will bring about a collapse of the house of cards that is the petitioner, the related companies and indeed the wider group that is associated with them.”
The banks had therefore stood back and not only took no steps to recover the monies but some banks actually advanced more sums to pay off the companies unsecured creditors.
“It is sometimes said that when small or modest borrowers encounter difficulties in repaying their loans, then such borrowers have a problem. For those with larger borrowings, it is the banks who have a problem,” he said. “If ever a case demonstrated the accuracy of that proposition, it is this one.”
He had the “gravest reservations” about the projections on which the independent accountant relied given the extraordinary collapse of the property market and little of no indication of a revival in its fortunes.
The projections were based on discussions with the companies management and out of date valuation reports by two firms - CBRE and Hooke & McDonald, who could not be considered fully independent having worked for the group in the past.
The propsed survival scheme was also most unusual as it would not require any investment in the companies or a write down of debts. One or both such elements figure in practically all schemes relating to companies in examinership, the judge noted noted.
No investment was required because the banks would continue to provide funds towards development of the lands and no write down was envisaged because the banks were the only creditors, he noted.
In all the circumstances, he was not satisfied the companies had a reasonable prospect of survival. Even if so satisfied, he would exercise his discretion to refuse protection because there was “something artificial” about what was proposed.
The only creditors involved are the banks and they would be able in any event to take steps to reclaim their debts and deal with the property involved, he noted. They would be expected to maximimse its value as they saw fit.
The Irish Times
Posted by Southofdub at 11:13 AM