The Court of Appeal has ordered the appointment of an examiner to seven companies in the Barrett group, allowing appeals by four companies and dismissing Deutsche Bank AG’s cross-appeal against the earlier appointment of an examiner to three others.
The judgment, delivered by Mr Justice Gerard Hogan on 4 October 2017, overturned part of a High Court decision that had appointed an examiner to KH Kitty Hall Holdings Limited, ML Meyrick Limited and MT Mono Trading Limited, but refused appointments for Edward Leisure Assets Unlimited Company, Niche Hotels Unlimited Company, Style City Limited and Radical Properties Unlimited Company.
The companies had applied for examinership amid financial difficulties and a dispute with Deutsche, their major secured creditor. A December 2016 agreement provided for refinancing and asset sales to reduce the debt, with any remaining debt to be assigned to a Barrett nominee for €100. Deutsche appointed a receiver to certain assets on 18 August 2017. The companies sought an interim examiner the following day; a High Court judge granted that application.
The Court of Appeal held that the statutory requirement of a reasonable prospect of survival as a going concern was met for all seven companies. It said the trading businesses could potentially survive if their legacy debt were sufficiently written down, and referred to reports expressing confidence in their viability if an appropriate scheme could be put in place. Seventeen potential investors had expressed interest, though the court said it was premature to know whether satisfactory offers would emerge.
The court rejected Deutsche’s arguments that the companies’ application should be refused because of Mr Barrett’s alleged motive to retain control, alleged failures to disclose information at the urgent interim hearing, or the prior debt settlement. It held that the 2016 agreement did not itself prevent an examinership application and that its inconsistency with the process could not, by itself, decide whether an examiner should be appointed.
The ruling was limited to appointment. The court made no finding that a rescue scheme would ultimately be proposed or approved. Any scheme would still have to satisfy the statutory requirement of fairness to creditor classes, including Deutsche. The court said it was expressing no view on whether that test would be met.