The High Court has again refused to confirm a scheme of arrangement for five McInerney companies in examinership, finding that the proposal remained unfairly prejudicial to KBC, a creditor in the banking syndicate.
In a judgment delivered on 17 February 2011, Mr Justice Clarke reconsidered a limited part of his earlier ruling after new material raised the prospect that Bank of Ireland and Anglo Irish loans to the group would be acquired by the National Asset Management Agency (NAMA). The court had refused confirmation of the scheme on 10 January, finding it unfairly prejudicial to the banking syndicate. It reopened the matter only to assess whether the NAMA issue changed that conclusion. The earlier findings otherwise remained in place.
The judge assessed it as significantly likely, but not certain, that NAMA would acquire the Bank of Ireland and Anglo Irish portions of the loans. If it did not, the prejudice identified in the January judgment remained. If it did, the court said the amount the banks might receive was too speculative to establish that they would do sufficiently better than under the scheme for their treatment to make it unfairly prejudicial.
KBC’s position was different because it was not a participating institution for NAMA purposes, and NAMA could not acquire its portion of the loans. The judge found a real possibility that KBC could do materially better alongside NAMA than it would under the proposed scheme. That could arise if KBC gained leverage in dealings with NAMA or if NAMA chose a long-term receivership model, or an acceptable variation of it. The court did not decide whether NAMA could sell secured assets without KBC’s consent; it said there were significant arguments either way and declined to prejudge a possible dispute involving NAMA, which was not a party to the proceedings.
The court also retained the earlier assessment that the syndicate had made a credible case that the long-term receivership model could produce a present value of about €50 million. The judge said the new material did not alter the conclusion that the scheme unfairly prejudiced KBC. Because unfair prejudice to one creditor was sufficient, the scheme was again declined confirmation. The judgment did not approve the scheme or resolve what NAMA would ultimately do.