US fund Blackstone and Michael O'Flynn look poised for a legal battle for control of the developer's property and construction empire to which an examiner and receivers were appointed yesterday.
Blackstone bought €1.8 billion in loans secured against the Cork-based O’Flynn Construction group from State assets agency Nama, in May for €1.1 billion. The deal made it the business’s principal creditor, giving it the power to call in the security for those debts, namely the group’s assets and companies.
Following an application from Blackstone's affiliate, Carbon Finance, yesterday, the High Court appointed Michael McAteer of Grant Thornton as interim examiner to its four trading companies, O'Flynn Construction Company, O'Flynn Construction, O'Flynn Construction and Eastgate Developments.
Carbon is also appointing Grant Thornton as receivers over group companies' shares and assets in Ireland, Britain, m the British Virgin islands and the Isle of Man. The firm's partners, Paul McCann and Paddy Dillon, will be taking control of assets in the Republic.
The receivers are being appointed on foot of personal debt, said to be just over €20 million, owed by Michael and John O’Flynn and others.
Carbon demanded repayment of this yesterday and said that if that were not forthcoming it would appoint the receivers, giving it control over the assets involved.
Several hearings
However, it looks like yesterday's hearing could have been the first of several that will ultimately determine who gets control over O'Flynn Construction, which has operations in Ireland, Britain, Spain and Germany.
Mr O’Flynn said in a statement, that he had begun talking to his lawyers, indicating that he is considering a court challenge of his own. Along with this, he will have the opportunity to challenge the examiner’s appointment. This was made only on an interim basis and is due back in the High Court on August 27th for a full hearing.
His statement said that both the O’Flynn Group debts and some personal loans were fully serviced with all payments up to date. However, it is understood that some of the personal debts are repayable on demand.
For its part, Carbon argues that the group is ultimately insolvent and will not be able to repay €235 million that is due at the end of this year. The US fund says that as the O’Flynn group cannot repay its debts, it is the group’s effective owner.
It bases this on the fact that the shares in its British Virgin Island-based parent, Colebridge International, are pledged as part of the security for those debts. It is clear that relations between the two sides have broken down since Blackstone acquired the O'Flynn Group debts in early May.
“Aggressive move”
Mr O’Flynn’s statement said that he had been in talks with representatives of Blackstone to agree a framework to take the business forward. “Today’s development represents a very unexpected and aggressive move on the part of Blackstone Group,” he added.
Carbon claimed in court documents that the O’Flynn Group’s directors and shareholders had not been “co-operative” and had failed to provide audited accounts for the business for 2013.
