A company of Blackstone investment fund management group which bought €1.8 billion liabilities of the Cork based O’Flynn Construction Group from Nama has secured the appointment of an interim examiner to four key companies in the group.

Demands were also served today on Michael and John O'Flynn, as principal shareholders of the parent company, for immediate repayment of what the High Court was told were their "substantial" personal debts to Nama, which debts had also been sold to Carbon Finance Ltd, an affilitate of the Blackstone group.

If repayment was not made, it was intended to enforce security over assets of the shareholders, including their shares in the parent company, resulting in an event of default on the corporate facilities, it was stated.

In the absence of payment, it was intended to appoint Grant Thornton as receivers today over certain assets of certain other group companies in Ireland, the UK, British Virgin islands and the Isle of Man. It was not intended to appoint receivers over assets of the four companies because it was believed those could survive as a going concern once certain conditins are met.

The four companies are O’Flynn Construction Company, employing 16 people; O’Flynn Construction BTC; O’Flynn Construction (Rochestown) and Eastgate Developments (Cork).   The directors and principal shareholders of the companies have not been “co-operative” with Blackstone and that, combined with lack of information about accounts of the group, led to the bringing of the petition, it was stated.

The petition was brought by Carbon, as creditor of the companies, and moved by its cousnel Paul Sreenan SC this afternoon before Mr Justice Brian McGovern.

While Carbon believed the companies were insolvent as of now, it also believed they had a reasonable prospect of survival and envisaged a scheme of arrangement which would involeve writing off a significant portion of the companies’ secured debt and further investment of some €16m over five years for purposes incouding to copmplete and rent out units within the group’s property portfolio.

Mr Justice McGovern granted court protection to the four companies and appointed Michael McAteer of Grant Thornton as interim examiner. Court protection will continue until the hearing of the petition on August 27th on condition an Interim Accountants Report, to be prepared by Kieran Wallace of KPMG,  is provided by August 7th.

Mr Sreenan said the co-operation of the directors of the O’Flynn companies, who include Michale and John O’Flynn, would be required for preparation of the IAR and his side considered that would be fortchioming only if the couyrt appointed an interim examiner.

Mr Sreenan said Carbon was an affiliate of Blackstone Real Estate Partners which had bought the €1.8 billion Nama debts of the various corporate debtors for more than €1 billion and was the largest secured creditor of the companies.

In its petition, Carbon said, having reviewed the options, it had concluded, based on the limited information available to it, “value optimisation” in the case of the comnpanies required a restructuring ikely to involve fresh investment of funds, significant debt reduction and operaitonal improvements designed to maximise future returns.

It said the four companies are members of the O’Flynn Group, based in Ballincollig, Co Cork, and comprising 80 entities. None of the other comnpanies are subject of this application, it said.

Carbon said it has access to little substantive information about the companies whose directors and principal shareholders had not to date been co-operative with it. The Group had failed to provide audited accounts for 2013 to Carbon and had stipulated conditions for a meeting in Cork on July 28th last which were not acceptable to Carbon.

In thsoe circumstances, and because Carbon believed there were exceptional circumstances outside its control, it decided to bring the petition.

The four companies each owe €900 million as borrowers under the corporate facilities and have guaranteed the entire €1.8 billion debts of the group, it said. Carbon believed each of the companies was “of questionable liquidity” at present and at risk of being unable to meet their liabilities as they fall due.

It appeared the group was both insolvent from a cash flow and balance sheet perspective, Carbon said.

Even if not currently insolvent from a cashflow perspective, the companies would unquestionably become insolvbent on December 31st 2014 when some €235 million was payable to Carbon, including a €70 million sum deferred from March last.

Carbon said the top company in the O’Flynn group is a British Virgin islands company, Colebridge International Ltd. Michael and John O’Flynn owned 53 per cent and 43 per cent of the entire issued share capital in Colebridge while Patrick Kelleher held 4 per cent.  That share capital was charged as share security to Carbon as security for the company loans and, given the companies’ insolvency, Carbon was essentially the holder of all equity in the Group, it said.