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Archive for October 13th, 2010

There was a puzzling aspect to yesterday’s announcement that Pierse Contracting and Pierse Building Services had been granted examinership in Dublin’s High Court. Normally the key figure in any examinership is the debt of the company, for example McInerney owe €114.5m including interest to three banks, Liam Carroll’s Zoe group had debts of €1.3bn when it applied for examinership and the Fleming group had debts of more than €1bn. However the only figure highlighted in yesterday’s reporting of the Pierse examinership was the €30m that was owed to the group and indeed the focus was on €16m apparently owed to Pierse by Gannon Homes (Gerry Gannon being reputed to be a NAMA Top 10 developer). There were no headlines about Pierse’s debt mountain which was later put at €310m.

The Independent’s headline on its Pierse story today is “Firm would still be trading if €16m debt was paid”. The Independent says that Gerry Gannon’s debts were transferred to NAMA last March and “he is engaged with the agency to develop a business plan to work out his debts over the coming years”. Pierse claim that one of those debts is the €16m referred to above. There has been criticism that the agency is slow to react to events and deal with developer business plans. The Independent says “a [NAMA] spokesman said that no application for credit from its clients has been outstanding for more than one week and that it has provided more than €40m in working capital to developers to continue their various projects with a view to maximising the return for the taxpayer”. So the implication was that if Gannon was being pursued for the €16m by Pierse and Gannon wanted to pay the alleged debt and couldn’t, then Gannon would apply to NAMA for funds. And it seems that hasn’t happened.

With respect to the debt itself, it is understood to relate to a development at Clongriffin, Grange Road, Baldoyle. I have looked at High Court applications in respect of Pierse Contracting and Gannon Homes and see that there were two applications in 2009 (2009 11622 P and 2009 1627 P) and one in 2010 (2010 199 S). The only reporting of any case I can find is on 2nd February, 2010 when a case was admitted to the Commercial Court where the redoubtable Mr Justice Peter Kelly conducted the hearing. The hearing was reported by both the Independent and Irish Times. The upshot was that Pierse had apparently undertaken work for Gannon Homes with what seemed like a flimsy (at best) contract. The judge is reported as saying that it was “rather astonishing” that the works commenced without any formal contract. The case was adjourned until April 2010 but it seems that the courts have not yet returned to it and that there has been no further reporting of the case.

A reliable source has suggested that a meeting was recently arranged at the highest political level between NAMA and Pierse to examine the issue of the alleged Gannon debt and that NAMA refused to move on the matter. If that is correct, then it would demonstrate NAMA’s backbone in dealing with matters in an openly commercial manner. It is very sad and worrying that Pierse is facing difficulties – they have 211 employees and many subcontractors and I don’t downplay their significance and the seriousness of their situation. But NAMA it seems has stuck to its principles in how it spends our money and has not been railroaded into spending money unnecessarily.

As for Pierse’s finances, it has been now been revealed that they owe €310m to creditors and with revenues of €100m per annum, that Gannon debt is but a drop in the ocean. Whilst NAMA might have some control over Gerry Gannon’s affairs, it is not responsible for that €310m of debt.

As for Pierse itself, the company is the third biggest builder in the country apparently and provides significant employment. The company is no doubt suffering as a result of apparent ministerial delays in spending the capital budget for the year and I hope that those purse strings can be loosened as there are many other construction companies in dire straits. It goes without saying that Pierse is suffering from the downturn in all construction activity and I hope that it can diversify here (for example into energy efficiency/insulation) and possibly expand overseas using its base here as a hub. I also hope it has success with getting a third party investor or joint venture partner. That said, its problems should not be visited upon NAMA.

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