Monday, February 21, 2011

High Court rejects rescue plan for McInerney - The Irish Times - Fri, Feb 18, 2011


THE HIGH Court yesterday rejected a rescue plan for housebuilder McInerney because the proposals were unfairly prejudicial to the interests of Belgian-owned bank KBC, one of three lenders to which the group owes €113 million.

The rescue plan for McInerney’s Irish business, which has been in examinership and under the High Court’s protection from its creditors since September, involved an offer of €25 million in full settlement of the bank debt from US fund Oaktree Capital, which had been planning to invest in the company.

Early last month, the High Court ruled against the proposal on the basis it was unfairly prejudicial to the interests of the three banks involved: KBC, State-owned Anglo Irish and Bank of Ireland.

Mr Justice Frank Clarke agreed to revisit the ruling after it emerged €80 million or so of the total which was due to the two Irish lenders was destined to be transferred to the National Asset Management Agency (Nama).

After hearing further submissions from the banks, the company and the examiner, Bill O’Riordan of PricewaterhouseCoopers, the judge ruled yesterday he could not confirm the rescue plan as it was unfairly prejudicial to KBC.

“A scheme is unfairly prejudicial where it is unfairly prejudicial to one creditor,” his ruling states. “KBC is such a creditor.”

As a result of the ruling, McInerney now faces the possibility of being placed in receivership, with the potential loss of 109 jobs.

The judge is due to make final orders relating to the case on Monday. It is understood the company is considering appealing to the Supreme Court.

Examinership legislation requires the courts to refuse to confirm a rescue plan put forward by the examiner if it is unfairly prejudicial to any creditor. Effectively this means that the creditor would fare better in either a receivership or a liquidation.

All three banks, which acted as a syndicate when they loaned the money to McInerney, opposed the examinership and the rescue plan, even though a majority of creditors backed the scheme.

Instead they proposed an 11-year receivership and argued that they could recover an estimated €50 million over the course of this by building on the McInerney sites, against which the debt is secured, and selling the homes.

When he ruled last month, Mr Justice Clarke said the banks had put forward a credible case to support this claim and, as a result, the rescue plan was prejudicial to all their interests.

Yesterday, he said it appeared likely that Nama would take over the Anglo Irish and Bank of Ireland loans. While he agreed that it was possible the State agency would pay more for their share of the loans than the amount on offer under the rescue plan, the chances of that happening were “so speculative as to provide little basis for a real assessment of prejudice”.

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