An action by AIB to recover €550m in loans from companies in the troubled Zoe Group has been admitted to the Commercial Court and will be heard next Friday.
The bank is seeking an order to appoint a receiver over a large number of commercial and residential properties owned by five companies in the group. It is claimed the companies have defaulted on repayments.
The bank demanded repayment of the loans last October after key companies in the Zoe Group were refused court protection.
Mr Justice Peter Kelly entered proceedings to the Commercial Court against the five Zoe companies, Danninger, Eppo Developments, Fabrizia Developments, Oze Construction and North Quay Investments Ltd.
He said it was clearly commercial lending on a grand scale and commented that the letters of undertaking held as security by AIB was 'a fragile form'.
The bank is moving under a facility agreement of March 2009 made between it, the five companies and Vantive Holdings (the funding company of the Zoe Group) under which AIB continued loan facilities of €528m to the five companies and also agreed to make available additional loans.
The bank claims €550m is now owed to it under that facility agreement and claims it has security for that amount on the basis of letters of undertaking from solicitors for the defendant companies and the deposit of title deeds for the various premises.
It wants declarations from the court that the €550m sum stands 'well-charged' on the various companies' interest in the relevant lands and premises.
Mr Justice Kelly said it was 'a rather astonishing feature' of the case the loans were secured on letters of undertaking which he said was a 'far cry from a legal mortgage'.
He also said that had the defendant companies not accepted that some of the letters contained mis-statements about the beneficial owners of the properties, AIB might have had difficulty proving its entitlement to some of the orders sought.
