One of Ireland’s oldest building companies, McInerney Homes, is back in the High Court at 2pm today to learn whether the plan for survival submitted on Friday last by examiner Billy O’Riordan of PwC, is promising enough to persuade the judge, Mr Justice Frank Clarke to allow the examinership to continue. The case is by no means assured for McInerney who seemed to have submitted an optimistic outlook for residential property in the State when they were granted conditional examinership on 13th September, 2010.
As has been noted here before, examinership (which is an Irish invention but closely modelled on US Chapter 11) is becoming more difficult to secure particularly for construction and property development companies. McInerney claim that 100 jobs depend on being allowed to complete the examinership process that might see banks paid 60c in the euro and US fund (and sometimes “vulture fund”) Oaktree Capital injecting a reported €10m into McInerney in Ireland (and a further €30m in McInerney in the UK which is not subject to the examinership proceedings).
The case has relevance for NAMA as two NAMA Participating Institutions (PIs – Bank of Ireland and Anglo) have loans of a reported €70m outstanding with McInerney. Although NAMA was blamed by McInerney for its immediate woes which saw a sudden withdrawal of facilities in August 2010, NAMA is apparently adopting a neutral stance on the examinership application though the syndicate of banks (AIB, Anglo and non-NAMA Belgian-controlled KBC) who are owed a reported total of nearly €115m (including interest) are against the examinership. The paradox of NAMA being neutral and the banks whose loans are NAMA-bound and on which NAMA has substantial input courtesy of the NAMA Act has been examined on here before (links at bottom).
McInerney’s future will be placed in immediate jeopardy should the examinership protection be withdrawn by Judge Clarke this afternoon. Whilst it is not certain, the banks may seek to appoint a receiver to recover their debt.
There are background entries on the McInerney examinership here and here and here and here and here. Updates here later – the betting on here is that examinership will be withdrawn. UPDATE: RTE is reporting after the hearing today and says that the judge, Mr Justice Frank Clarke is allowing the examinership to continue with a further review on 2nd November 2010. Good news for McInerney though plainly the judge is closely monitoring the progress of the examinership. UPDATE: 5th October, 2010. Barry O’Halloran at the Irish Times seems to have best report of the case today and says that on 29th October, 2010 an updated progress report is to be submitted to the court by 29th October, 2010 with examinership extended to 2nd November 2010 and a full hearing on 5th November 2010 – the status of the examinership between 2-5th November, 2010 is unclear. Also of interest is that the accelerated loan transfer programme at Anglo will mean that NAMA have more direct control over the €30m Anglo loan to McInerney at the start of November 2010. BoI have a reported €50m outstanding to McInerney and that will presumably transfer to NAMA by the end of this year though the NAMA Act grants NAMA extensive influence over NAMA-bound loans even when they sit with the banks.
UPDATE: 2nd November, 2010. The Irish Times today reports that there will be a haring on Friday next 5th November, 2010 to decide if the examinership should continue another 30 days to bring the period to the maximum generally allowed in Ireland of 100 days. The examiner is reported to have delivered an rescue proposal to the court last week and a hearing is scheduled for Friday.
UPDATE: 3rd November, 2010. Mr Justice Frank Clarke will consider extending the examinership period for a further 30 days when the court next deals with this matter on 5th November, 2010. The Independent today reports that there is a little bit of fuss between McInerney and the banks over valuations of McInerney property. Apparently McInerney has written down the value of the property by 50% (no context given – from peak? from purchase? what property?) but the judge is today to examine a “confidential” report supporting McInerney’s valuations. McInerney’s examiner William O’Riordan is also looking for some privacy in his talks with potential investor Oaktree. The banks say that Oaktree’s reported investment is “palpably inadequate”. So McInerney, safe until Friday but what next? The Irish Examiner also reports on the case today.
UPDATE: 4th November, 2010. At the High Court today the judge, Mr Justice Frank Clarke, declared (according to the Irish Examiner) that ” the haircut taken by the banks on their debts [in an examinership] cannot be more severe than if they went to the receivership barber”. The judge declared himself unhappy with an “unsatisfactory report” from the examiner. The case faces a key hearing tomorrow when the judge is being called on to decide if he should continue the examinership for a further 30 days. I would say that the signs aren’t good from McInerney’s point of view.
UPDATE: 5th November, 2010. RTE is reporting that the judge dealing with the matter, Mr Justice Frank Clarke, will decide on Monday next 8th November, 2010 whether to continue the examinership for a further 30 days. There seems to be some issue with the present value of McInerney’s assets with claims that they have lost 1/3rd of their value in the last three months alone. From what I could gather the valuations (and indeed projections for recovery) at the start of September 2010 looked optimistic and was surprised that the Commercial Court granted the examinership in the first place.
UPDATE: 8th November, 2010. RTE is reporting that in the High Court this morning, the judge Mr Justice Frank Clarke agreed “with considerable reluctance” to a continuation of the examinership until 3rd December 2010. In what may turn out to be a precedent if true, the judge agreed to continue the examinership because, in the negative, there was not sufficient evidence to convince him that McInerney didn’t have a chance of restructuring. To the best of my knowledge the usual test has been in the affirmative, that is that examinership is only granted where is evidence that the company has a reasonable prospect of recovering. Regardless the company now has another 25 days (30 days from last Wednesday when the matter was heard and adjourned so that further information could be produced). I don’t think anyone is betting that the company will succeed in restructuring in particular because banks who are owed the most have adopted a negative stance towards the examinership and will probably reject any offer and seek immediate receivership.
UPDATE: 19th November, 2010. With just two weeks remaining before the examinership period expires, RTE is reporting that McInerney has decided to de-list itself from the Dublin and London stock exchanges. The company claims the listings are “no longer in the best interests of company or its shareholders as it is no longer in a position to meet its continuing obligations for listing”. The betting must be that McInerney will be placed in receivership on 3rd December, 2010 unless some substantial rabbit can be pulled from the hat.
UPDATE: 30th November, 2010. We should find out by the end of this week (3rd December, 2010) the shape of McInerney’s future. Meanwhile the High Court has published its determination with respect to the initial application for examinership which was strenuously opposed by the banking syndicate of Bank of Ireland, Anglo and KBC. The determination seems to me to betray a degree of partiality and benefit of the doubt by the judge, Mr Justice Frank Clarke, who judged that Oaktree, “a substantial realistic and skilled investor” would only be pursuing a deal if McInerney had indeed a prospect of survival in some form. Given the smaller unsecured contractors and McInerney’s workforce, I would tend to have sympathy for the judge offering McInerney every opportunity within what has been a 100-day period of the examinership to work out a deal which might see some future for the company. Alas the betting is that that receivership will beckon on Friday.
UPDATE: 3rd December, 2010. This update relates to the news last week that a liquidator (Billy O’Riordan of PwC who has been acting as examiner) has been appointed to two of the five McInerney companies that were originally granted examinership protection – McInerney Construction (Holdings) Ltd, and McInerney Contracting Dublin Ltd which were mainly involved in contracting out work and managing investments in subsidiaries. Examinership has been lifted for a third company, McInerney Holdings plc, which is now capable of paying its way. Therefore the examinership protection now only applies to two companies – McInerney Homes Ltd and McInerney Contracting Ltd. We wait to hear their fate today.
Also from last week, the Irish Times reported that the scheme of arrangement for the two McInerney companies still subject to examinership had the support of most of the creditors (by number) though it seems that the banking syndicate (Anglo, Bank of Ireland and non-NAMA KBC) are set against the scheme and believe that they might recover €90m of the €113m owed under a “slow burn” receivership.