The Court of Appeal has confirmed the appointment of an examiner to seven companies controlled by Galway-based businessman Gerry Barrett.
Last month the High Court dismissed an application to grant the protection of the courts from their creditors to four firms connected to businesses including the Galway City based five-star G Hotel and the Eye Cinema.
BY AODHAN O’FAOLAIN
The High Court did confirm the appointment of insolvency practioner Mr Neil Hughes as examiner to three other related companies, involved in the operation and ownership of the 4-star Meyrick Hotel, located in Eyre Square in Galway.
Mr Hughes of Baker Tily Hughes Blake was appointed interim examiner to all seven companies, which are part of Mr Barrett’s Edward Capital Group, in August.
His appointment was sought by the companies after Deutsche Bank appointed a receiver over the firms, which employ more than 330 full-time and part-time staff.
Deutsche Bank, which is owed more than €690m by the group, had opposed the examinership claiming it was an abuse of process and an attempt by the companies to renege on a 2016 debt settlement agreement which would have resulted in the sale of the group’s assets to reduce its debt to the bank.
That was denied by the companies, who argued that Deutsche Bank had breached the settlement agreement.
The companies appealed the High Court’s decision not to confirm an examiner to the four companies.
In a cross appeal Deutsche Bank sought to have the decision to confirm Mr Hughes to the other three firms set aside.
On Wednesday morning the three judge appeal court said it was allowing the companies appeal, and was confirming Mr Hughes as examiner to all seven firms.
The court, comprised Ms Justice Mary Finlay Geoghegan, Mr Justice Michael Peart, and Mr Justice Gerard Hogan, also dismissed Deutsche Bank’s cross appeal against the decision to appoint Mr Hughes to the companies connected to the Meyrick Hotel.
In his judgment Mr Justice Hogan said he was satisfied that the companies had demonstrated that they have a reasonable prospect of survival as going concerns.
Both the independent expert and Mr Hughes had expressed confidence in the capacity of the companies to survive should an appropriate scheme of arrangement be put in place, the Judge said.
He said the application for examinership was inconsistent with the obligations imposed on the companies in terms of the debt settlement agreement.
However “this fact cannot in itself” preclude the appointment an examiner, the Judge said.
This is because the examinership system is premised on the assumption that pre-existing commercial contacts will be overridden, varied negated and dishonoured in the wider public interest of rescuing an otherwise potentially viable company, he said.
The Judge added he did not think there had been any lack of candour by the companies when they sought the examiner’s appointment.
The fact Mr Barrett may wish to retain control or some of the assets of his group was not a material consideration in relation to the appointment of an examiner, the judge added.
In her judgment, which concurred with the findings of Mr Justice Hogan, Ms Justice Mary Finlay Geoghegan said the firms petition to have an examiner appointed “was not an abuse of process.”
While the 2016 debt settlement agreement was a relevant matter that could be taken into consideration, the Judge said the court should exercise its discretion in favour of appointing an examiner to all seven companies.
Mr Hughes has up to 100 days to put in place a scheme of arrangement with the firm’s creditors, which if approved by the courts will allow the firms to continue to trade as going concerns.
In a ruling delivered in September the High Court confirmed Mr Hughes as examiner to KH Kitty Hall Holdings Ltd, Ml Meyrick Ltd and Mono Trading Ltd, after being satisfied the companies have a reasonable prospect of survival.
However, Mr Justice Tony O’Connor dismissed the application to allow the firms Edward Leisure Assets Unlimited Company, Niche Hotels Unlimited Company, Style City Limited and Radical Properties Unlimited Company remain in examinership.
Those firm’ assets include the G Hotel, the Eye Cinema, 38 apartments, a retail park, and sites in the Galway area.
Seeking the appointment of an examiner the firm’s directors, Gerry Barrett and Catherine Barrett of Drimbawn House, Chestnut Lane, Lower Dangan, accepted the group is “very significantly indebted” to Deutsche Bank.
They claimed while they could service a certain level of the debt, a large amount of what is owed can never be repaid.
The companies, represented by Michael Cush, Garry McCarthy, and Ross Gorman, Bl, claimed the creditors and the employees would do better in a scheme of arrangement put together by Mr Hughes.
Deutsche Bank which acquired the group’s loan portfolio from NAMA in 2015, said the examinership would not be better than the agreement the parties had reached in regards to the sale of assets, including the proposed sale of the Meyrick to a third party for €16.7m, to reduce the group’s debt.
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