The Zoe Group

The judge said the proposed scheme includes “pouring” money into developments over the next three years when the office space market was already “grossly oversupplied” and the residential market was “flat as a pancake” and showing no sign of revival.

The court heard chartered accountant Fergal McGrath, author of a report recommending the survival scheme, was a member of the Zoe group’s auditors, LHM Casey McGrath.

The judge noted the independent accountant’s report recommended existing senior management remain in place. “The captains who navigated the ship onto the rocks are to remain in charge,” he observed.

An “extraordinary” number of directorships were held by directors of the petitioning companies “no doubt for the best fiscal reasons” and the court had to deal with “a maze, a spider’s web” of companies, he added.

All of the group’s major bank creditors and the Revenue have adopted a neutral stance towards the examinership application and the court heard some of the banks had advanced further monies to pay off most of the group’s trade creditors.

AIB and Bank of Scotland Ireland are the largest lenders with 40 and 23.8 per cent of the €1.2 billion borrowings respectively.

ACC Bank, which earlier this month issued letters of demand over its €136 million debt, said it was “guardedly neutral” but its counsel Rossa Fanning warned that stance could change during the examinership if the National Assets Management Agency (Nama) legislation was deemed unfavourable towards the bank.

Michael Cush SC, for six key companies in the Zoe group which effectively finance all the other companies, indicated the exercise of “forbearance” by the banks was crucial to the survival scheme. The group had engaged with the banks last December and produced a survival plan agreed to by all banks except ACC.

ACC took a different view and its subsequent move to call in loans led to this “almost unique” and “most unusual” application for protection which had the prior support of 90 per cent of banker creditors and no write down of debts was proposed, he said. If there was a winding up, there would be an enormous write down and the estimated deficiency would exceed €1 billion.

An orderly realisation of assets was proposed and it was anticipated there would be a €300 million surplus after three years and all creditors would be paid. The group had sold 39 units for €11.7 million since last December and had a rent roll of €25 million which was expected to increase.

Mr Cush said the group had a number of “quality” sites in Dublin’s docklands which would “regain value when the property market improves”. Counsel read from an affidavit of Mr Carroll’s who said be believed the sites would be at the forefront of the future development of Dublin.

Mr Cush added valuations from CBRE and Hooke and MacDonald of December 2008 were included in the papers before the court. In reply to the judge, he said these valuers had worked for the Zoe group as had practically all valuers.

The consequences of protection being refused and the group being wound up would be “enormous”, counsel said. It was very unlikely the market could absorb such a huge property portfolio at once.

The Irish Times