An appeal against a Circuit Court judge’s decision to refuse examinership for a construction firm heard the process would be ‘an exercise in futility’ in the case of the developer of a large office block beside St Stephen’s Green.
KC Capital is behind a nine-storey office block on Cuffe Street known as the Greenside Building. The court heard it has built up more than €53 million in debts but just two months of work remain.
The court heard that the most recent valuation of the property, carried out by QRE, placed the valuation of the finished and fully let property at €34.62 million. The market rent of the building was valued at €2.19 million per year, or around €182,000 per month.
David Kennan‘s KC Capital Property Group Ltd, as well as two group companies, sought to have Damien Harper of PUC Consultants appointed as interim examiner in late December. The appointment came days after receivers were placed over the company by a secured lender of some €53 million.
An independent expert report by Myles Kirby of consultancy Kroll advised the court the companies have a reasonable expectation of survival. The examiner’s appointment was due to be confirmed by the Circuit Court in January, but was opposed by its secured creditor.
The developer is, the court heard, relying on the result of ongoing litigation.
The dispute is over the supply of allegedly defective concrete by one of its suppliers, Keegan Quarries Limited, from which the companies hope to recover approximately €15 million. However, the court heard that the earliest conclusion of this action would be by 2028, or by 2029 should the decision be appealed.
On February 16th, a Circuit Court judge refused to appoint the examiner – characterising it as an “unnecessary costly exercise” that would not save any additional jobs. KC Capital appealed the decision.
The appeal was heard by Mr Justice Michael Twomey on Wednesday.
Barrister Ciaran Lewis, acting for KC Capital, argued the case surrounds whether the company has a reasonable chance of survival. It is understood that KC’s ownership hope to use additional investment to pay back their secured lender to keep the company and its case against the concrete firm alive.
Barrister Brian Kennedy, representing the secured creditor, a Fairfield Real Estate Finance fund backed by Oaktree Capital, said examinership would be a “costly and futile exercise”. He said it would be “likely” that the examinership would end up with a contested scheme of arrangements.
The court later heard that the loans from Fairfield and Oaktree are accruing interest of around €500,000 per month, more than twice the monthly rent of the building.
Kennedy said his solicitors had not been notified of how much the examinership has cost thus far, and echoed concerns he raised at previous sittings, that it would be Fairfield that would ultimately pay for the process.
Kennedy said that the existing shareholders shareholding would likely be eliminated under the examinership, but that the process would prejudice his client. He said it would be “hugely unlikely” that the secured lender would be able to recover the entirety of the more than €53 million loan.
The court heard that the investments on offer are “simply miles away” from what would be needed to generate a scheme of arrangements suitable to all parties. A sum of €34.5 million is being offered as an investment offer by Alinor Capital Management, a UK-based distressed debt fund.
The court heard that Wednesday marked the 66th day since the examinership process was instigated, with this protection process lasting for 70 days, unless an extension to a maximum of 100 days is approved by the court. A decision in the case, Judge Twomey was told, will be needed by February 27th.
A decision in the case is expected on Friday.