UPDATE 2-Irish tycoon loses court bid in blow for "bad bank"

* Top court refuses to protect developer from creditors

* Could increase writedowns at Allied Irish Banks

* Carroll's defeat may frustrate Dublin's "bad bank" plan

* Gov't to proceed with National Asset Management Agency

(Adds finance ministry reaction)

By Padraic Halpin

DUBLIN, Aug 11 (Reuters) - The Irish Supreme Court rejected Liam Carroll's last-ditch attempt to gain protection for his property empire on Tuesday in a ruling that could trigger a fire sale of his assets and complicate Dublin's "bad bank" plan.

The famously low-key builder has become one of the most high-profile casualties of Ireland's property crash and if he fails to ring-fence his assets from creditors it could complicate government efforts to restore confidence in the financial system via a "bad bank." [ID:nLU694667]

The court's decision to uphold an earlier ruling from the High Court means a receiver will likely be tasked with offloading Carroll's assets, from hotels to houses, in a knockdown sale that will drive down the market price of property before the government's "bad bank" is up and running.

Dublin plans to transfer property loans with a nominal value of 90 billion euros to a state-run "bad bank" starting later this year and has said the banks will not have to accept fire-sale prices, but that may be complicated by a Carroll sell-off.

"The court concludes that the petitioner has not established that its strategy for the orderly disposal of key assets of the company is credible or reasonably viable," Chief Justice John Murray said in a written judgment.

The finance ministry said the ruling would have no impact on the National Asset Management Agency (NAMA), which will proceed as planned, state broadcaster RTE reported. Spokesmen for the ministry did not immediately answer calls for comment.

Carroll's lawyer said that in making his original judgment, the High Court misunderstood the nature of the companies' proposed turnaround, applied its own valuations to the future property market and underestimated the level of support already offered by lenders. [ID:nLV359086]

Michael Cush said that in an agreement last December Carroll's lenders had already put in place a two-year moratorium on the repayment of debt, provided financing to pay off third-party unsecured creditors and afforded ongoing development.

"From the perspective of the company satisfying a reasonable case for survival, the level and type of support from the banks is enormously important," Cush said.

Carroll's companies covered by the judgment have debts of over 1 billion euros and Allied Irish Banks is the biggest lender, accounting for over 40 percent, followed by Bank of Scotland (Ireland) at nearly 27 percent, ACCBank, a subsidiary of Rabobank of the Netherlands, at 10.7 percent and Bank of Ireland (BKIR.I) at 9.3 percent.

Attempts by ACC to recover money lost in Ireland's property crash forced Carroll to seek examinership - a process that protects company assets from creditors for up to 100 days while a survival plan is worked on to keep the business afloat.

ACC's lawyer Lyndon MacCann said there was no evidence that the banks had agreed to support ongoing development in Carroll's companies and nothing was presented to credibly suggest the prospect of an economic upturn to assist any turnaround.

Tuesday's ruling will also likely represent one of Ireland's largest corporate failures and mark a stunning reversal of fortune for Carroll, sometimes referred to as the "apartment king" for his swathe of developments in inner city Dublin.

"It is not necessary to revisit the question of future financing since the court is satisfied ... that the petitioner has not demonstrated that there is a reasonable expectation that it or the related companies could survive as a going concern," the judge said.

Carroll, who is renowned for his thriftiness, has a 26 percent stake in Irish Continental Group (ICG_u.I), the owner of Irish Ferries. (Reporting by Padraic Halpin; editing by Andras Gergely, Gary Hill and Andre Grenon)