Liam Carroll's hopes for the Zoe Group, which owes nearly €1.3bn, lies with the Supreme Court which will hear his case for examinership this week. Carroll, who suffered an ankle injury recently, has told people that he remains convinced of his case and is confident of success.
The first priority though was to ensure ACC Bank, "the stray creditor" as Carroll's counsel Michael Cush described it last week, could not have a receiver appointed to the six companies that form the rump of the Zoe Group before the appeal was heard. First blood to Carroll on that score.
That the court's protection of the Zoe Group would remain in place until the Supreme Court hearing seemed a matter of course, so the only real story emerging from Tuesday's court case was that the developer looks set to have to deliver valuations of each property within the Zoe Group to the Supreme Court. If and when that happens, it will show exactly where Carroll lost his shirt, managing to build up €1.3bn of debts on properties that would be worth less than €300m if they came on the market in a liquidiation crisis.
Quite why the properties would be worth more than that if they were sold off in a non-distressed manner has yet to be clarified, and with development land prices down 80% plus and investment properties and residential property values down at least 50%, the liquidation-scenario valuations are not that far off market reality.
Property experts are also open about the fact that there are virtually no buyers around at present.
Nevertheless seven of Carroll's eight banks had provided "in principle at least" commitments for additional funding to build out schemes and a moratorium "for a matter of years" on repayments.
Despite having his petition for examinership forensically demolished by Justice Peter Kelly in the High Court, Carroll has also been telling people of his respect for the judge.
The two have history. Twelve years ago, Carroll had been told by Kelly that he was not "entitled to make profits on the blood and lives of" workers for his company after an employee had died on one of Zoe Developments' sites.
After that damning judgment, the Dundalk developer apparently cleaned up his act. Now he'll be hoping that the Supreme Court is willing to overturn Kelly's verdict on the examinership petition.
The "first pillar" of Carroll's appeal is based on their belief that Kelly had failed "to attach sufficient weight" to the fact that 90% of Zoe's creditors are on board with its survival plan.
Secondly, Cush said Kelly had "made two errors". He went beyond weighing of the evidence and instead "substituted his own view of the property market" rather than relying on the two sets of valuations.
The Supreme Court raised the issue that it hadn't been provided with those valuations. Cush said the individual valuations had also not been presented to Kelly; rather, round figures were used, and the judge had "characterised them as not being truly independent".
Cush also said Kelly "appeared to have misunderstood the nature of the turnaround envisaged", taking the valuations of less than €300m in a liquidation context which would leave them down about €1bn and comparing that to the envisaged profit of €300m after a work out.
Instead, Cush said, Kelly should have looked at a separate analysis which showed the current deficit was in the region of €265m and that the turnaround would therefore be in the region of €565m.
The judge had "mischaracterised the nature of the banks' position as 'somewhat artificial'" and made findings on the banks' intentions which were "wholly unsupported by the evidence". There had also been no mention of the evidence that the market could not absorb the impact of a property portfolio of this size coming on the market and if it came on the market it would have "implications" beyond the companies and the group.
ACC said it "would oppose the continuation of the stay" as it "doesn't appear possible conceptually to provide a stay against a judgment". It was "quite clear they will take whatever actions they see fit in the absence of a stay," said Cush
"We would suggest this is a very strong case for examinership," he added later, stating that an examiner could "engage with ACC" to resolve the group's difficulties with the bank and "assess the properties' valuations and report to court on them".
The chief justice said that if the "balance of convenience requires a stay", and given the court was "satisfied the petitioner has shown there are arguable grounds" for a stay then it was minded to grant one. It was clear "from facts and communications" that if the petitioner was not granted an appeal, "there are circumstances that would render it moot... in these circumstances a stay should be made". However "this matter should be heard" at an early convenience. The court set a date of this Tuesday to hear the appeal.
The significance of this case cannot be overstated, as a crystallisation of Carroll's property values would highlight just how much Nama will cost the state.
The white smoke from the soured-loans bank suggests that the average discount will be 30%, so with €90bn Nama will cost the taxpayer just over €60bn with no guarantee of losses we will end up with.
The real problem, and this will become apparent in the coming months, is that those loans were usually funded on a 70% loan-to-value basis meaning that the developer put up 30% of the money to buy a property.
In fact, it regularly just put up an investment property as a deposit so Nama might very well be buying any loans on that investment property too, meaning we lose on the double.