ACC bank has begun a Supreme Court challenge to a ten year survival plan for the Fleming Construction Group.
The bank is owed €21.5 million by one of the companies in the group which has overall debts of one billion euro.
This morning lawyers for ACC bank argued that the ten year plan approved by the High Court last month is not within the terms of the legislation governing the examinership process.
Senior Counsel Paul Sreenan said critical to the whole purpose of the legislation was the prospect of securing the survival of a company and not a roving commission to the courts to do anything they wish in an insolvency situation to save jobs.
He said the hiving off of profitable parts of the group could not ensure its survival.
Last month the high court approved a scheme which it described as capable of turning around the fortunes of three companies within the group - John J Fleming Construction, JJ Fleming Holdings and Tivway.
The scheme provides for the sale of the group's contracting arm and other assets to a new company. The banks would have control of the property development side which is focused on sites in Sandyford in Dublin.
However lawyers for ACC said its main debtor was Tivway and the asset over which it had a fixed charge, the Sentinel building in Sandyford, was now worth between half a million and one million euro for a debt worth €21 million.
He said the company could not even afford €3,500 a week to secure the Sentinel building and that money had to come from another of the companies.
Paul Sreenan for ACC said there were no plans to finance Tivway and said it was and will remain insolvent.
Paul Sreenan said it was inherently incredible that the banks would be interested in financing a company when its profitable side had been taken out.
He said the arrangments between the company and the other banks, Anglo, AIB and Bank of Scotland was like a ‘personalised NAMA’.
He said these three banks were owed substantial debts which would undoubtedly go to NAMA and the Sandyford site would not be ‘built out’ (to a saleable condition) by the banks.
He said the High Court had erred in making the leap or filling the gap in saying that the Sandyford sites would be built out.
He said the survival plan was focused on the construction company and the other two companies were being carried along on it.
It was a huge jump to say that any of the sites owned by Tivway or JJ Fleming Construction would be completed.
He said it was simply not going to happen, the evidence was not there. ‘Why would they when they will have transferred their debts to Nama?’ he said.
He said there was no evidence before the court that any bank was willing to advance any money to ‘build out’ a building over which ACC had a fixed charge.
Mr Sreenan said the High Court judge made a leap looking at all three schemes as if they were one, when each company should be able to stand on its own feet.
He added: ‘these are grossly insolvent companies’ and said the survival plan did not change that. The plan itself was also insolvent, he said.
He also argued that ACC was wrongly categorized as a contingent creditor and should have been categorized as an unsecured creditor which may have allowed it to get some dividend.
He said before Tivway applied for examinership there appeared to be a proposal to ‘cram down’ ACC or reduce its ability to extract money owed.
He said the three banks will manage their own portfolios of land but that did not amount to the John J Fleming construction operating as a going concern.
There was no evidence that working capital would be provided into the future.
Mark Sanfey SC for the examiner said the site in Sandyford was a gigantic mosaic owned by different companies and could only be developed harmoniously by the three companies going into examinership.
He said reason demanded that the secured creditors got together to develop it.
He was asked by the Chief Justice John Murray and Mr Justice Adrian Hardiman to point to evidence that working capital would be provided by the banks into the future.
Mr Sanfey said it would be difficult to get such commitments from the banks. The Chief Justice said it appeared there was no commitment but simply an expectation that the banks would provide funding into the future.
Instead there were only short term facilities being offered by the banks, he said.
The court heard that if the survival plan goes ahead there will be 15 employees left in John J Fleming Construction as others will be transferred to a new company.
