In January 2011, the High Court refused to approve an examiner’s rescue plan (“Scheme of Arrangement”) for construction company McInerney Homes Limited (“McInerney”), on the basis that the Scheme of Arrangement was unfairly prejudicial to the secured creditors consisting of a Banking Syndicate of Anglo Irish Bank Corporation Limited, Bank of Ireland plc and KBC Bank plc (the “Banks”). The Banks had opposed both the examinership and the Scheme of Arrangement, in particular arguing that it would be more beneficial to them if McInerney went into long term receivership. Although ultimately declined on the facts of the case, it is interesting to note the Court’s new departure in recognising that a scheme of arrangement entailing payment to a secured creditor of a written down sum in full satisfaction of its debt could, in theory, be approved.
McInerney and the examiner asked the High Court to reconsider it’s judgment in light of the fact that two of the Banks, Anglo Irish Bank Corporation Limited and Bank of Ireland plc were in the process of transferring their loans to NAMA and, therefore, the receivership model was highly unlikely to be put in place. The High Court, while accepting the arguments of McInerney and the examiner, stated that it would be unfairly prejudicial to implement the Scheme of Arrangement given that KBC Bank plc was not in NAMA and would have no difficulty in implementing the longterm receivership model. McInerney has appealed the decision to the Supreme Court and the Banks have cross appealed on the basis that the court was wrong to revisit it’s earlier ruling. It is expected this appeal may be given a priority hearing by the Supreme Court.
The fallout from this case is that it may dissuade construction/property companies from seeking to avail of examinership where there is severe bank opposition.
For more information on the above case, please click here.