Red letter day for two NAMA developers : McInerney and the Whelan Group (UPDATE: liquidator appointed to Whelan)

Time runs out today for McInerney as the High Court will see if there is any basis for the group to continue to operate under its own control as a going concern or alternatively to appoint a receiver that may salvage parts of the company though it is likely there would be some restructuring and loss of employment. Today is Day 100 of McInerney’s examinership. McInerney had been pursuing an investment from US group Oaktree and a restructure of its debt including some €110m+ owed to a syndicate of Bank of Ireland, Anglo and non-NAMA bank KBC. It should be stressed that the McInerney examinership relates to its Irish operations. Its UK operations which have suffered are in better health. Indeed if McInerney performs as well as rival Berkeley Homes which today provided an upbeat profit assessment driven dy strong housing demand particularly in London and the South-East of England, then McInerney’s Irish creditors might ask why the UK operation isn’t making more of an effort to rescue its struggling Irish sibling.

Also at the High Court  today will be Clare-based NAMA developer (though its flagship business is providing concrete products), the Whelan Group which is seeking examinership against the wishes of NAMA. Although NAMA was an interested party in the McInerney case in the sense that loans from Bank of Ireland and Anglo to McInerney were NAMA-bound, those loans had not actually transferred to NAMA when the examinship application was made in August 2010 and bizarrely NAMA adopted a neutral position with respect to the examinsership application. In the case of the Whelan Group, it is understood that the relevant NAMA loans have transferred and that NAMA is opposing the examinership.

I would have said that both companies face a difficult day in court, though plainly there are serious matters at stake for the companies and their various stakeholders including their employees and suppliers. There will be reporting here later on. There is a detailed entry on the McInerney examinership here.

UPDATE: 3rd December, 2010. The Irish Times is reporting that the Whelan Group has abandoned its bid for examinership and that all five companies in the group have been placed in liquidation with Carl Dillon appointed as liquidator. At the opening of the hearing this morning, Whelan withdrew its application and it seems that NAMA has been on the receiving end of blame which is rejected by NAMA, and indeed the judge, Mr Justice Brian McGovern, seems to have put a stop to guff coming from Whelan’s barrister, John O’Donnell SC, telling him that the court was not a forum for “spin”. A sad for the Whelan Group which has been in existence for 40 years, employs 100 today and owes Anglo €50m which has now been transferred to NAMA. Ross Fanning SC represented NAMA. The five companies in liquidation are Whelan Group (Ennis) Ltd, Whelans Limestone Quarries (Contracts) Ltd, Whelans Limestone Quarries Ltd, Whelans Quarries (Carraigtwohill) Ltd and Shannon Explosives Ltd.

UPDATE: 4th December, 2010. The Irish Times reports that McInerney’s examinership is to be continued to 20th December, 2010 when there will be a hearing before MrJustice Frank Clarke to decide the future group (just the two companies now seeking examinership – McInerney Homes Ltd and McInerney Contracting Ltd). The banking syndicate (owed €116m according to the Irish Times, up from the maximum of €114m I have seen previously but I suppose interest/penalties/costs may be pushing up the total) are reported to be still set against the examinership and proposed scheme of arrangement. It was at the end of August 2010 that McInerney sought examinership so with respect to the 100-day maximum period of protection, I understand that it runs from when full (as opposed to interim) examinership is confirmed which was 13th September, 2010 which I calculate means the 100 days will run out on 21/22nd December, 2010.

UPDATE: 6th December, 2010. The Sunday Business Post yesterday carried what has probably been the most comprehensive reporting to date on Whelan’s demise. According to the SBP, the group employs 140 people, had a turnover of €71m in 2006 but this had dropped to €28m “this year” and seems to have been forecast to drop further to €19m next year. The group’s accounts have apparently been re-stated for the past few years and there is an implication that revenues had previously been overstated – “inaccuracies related to the recording of duplicated sales invoices and the non-recognition of expenses in the profit and loss account”.  The article doesn’t refer to any consequences for the inaccurate reporting though presumably creditors that relied on the accounts might have cause to feel at the least aggrieved by what appears to have been inaccurate enhancements of the group’s position. The group has suffered from the collapse in the construction sector as well as planning delays with the siting of its controversial explosives operation and bad debts. It appears that the company has €62m of secured creditors (NAMA/Anglo €50m and Bank of Scotland €12m) and €10m owed to 2,000 unsecured creditors including €4m to Irish Cement.

UPDATE: 8th December, 2010. The Financial Times reports that the outcome of the McInerney examinership case is being watched closely internationally. The two NAMA banks Bank of Ireland and Anglo are known to be opposed to the examinership (as is the third non-NAMA member of the banking syndicate KBC) but the FT figures that even if the banks are opposed to the examinership Scheme of Arrangement that will be presented to the courts later this month, that if other classes of creditors consent to the Scheme, the judge will examine if the Scheme provides a better prospects of returns to the creditors than a receivership & if he/she concludes it does then that might signal a better environment for buyers of distressed companies as they may be able to freeze NAMA out of controlling the company’s future operations.

UPDATE: 27th December, 2010. McInerney’s examinership came back before Mr Justice Frank Clarke at the High Court on 21st December, 2010 and the judge said he would rule on the scheme of arrangement on 10th January, 2011. The proposal appears to be that Oaktree invests €48m in McInerney in Ireland which will be used as follows – €25m to repay the banking syndicate’s €113-4m, €2m for other secured critors, €1m for unsecured creditors representing 7c in the euro, €5m of an immediate investment in McInerney’s working capital and €15m pencilled in for future investment. The scheme doesn’t have the support of the banks but the fact that the judge is taking some time in considering it means that it is arguably appropriate. So the key date is now the 10th January, 2011.

UPDATE: 5th January, 2011. The Irish Examiner reports on an exchange between the TD for the Clare consituency in which some of Whelan’s employees were located and NAMA. Fianna Fail TD Timmy Dooley received a reply from NAMA Chairman Frank Daly in which the agency claimed that it was as a result of uncovering apparent irregularities in the affairs of the Whelan group that prompted NAMA to change its stance on the examinership from neutral to negative, and secondly “the company did not put forward any evidence of a reasonable prospect of survival of the group”