Judge warns of rise in failure of examinership

A HIGH Court judge has expressed concern that the credit crisis is leading to “a much greater risk of failure” for companies placed under court protection.

Mr Justice Peter Kelly made his remarks yesterday as he approved with “some misgivings” court protection for two companies involved in developing the Parkside shopping centre in Portlaoise, Co Laois – where survival is dependent among other things on completion of the sale of 75 of 91 residential units.

Just hours later, he heard that a company employing 127 people which was under court protection was now believed to have no reasonable prospect of survival. He appointed a liquidator to Swissco Ltd, a chilled meals company based in Little Island, Cork.

Swissco is part of a group of companies comprising Cresset, a wholly-owned subsidiary of International Cuisine Ltd (ICL), which is in turn owned by Singapore Food Industries (SFI) Ltd. It was placed under court protection some weeks ago but yesterday examiner David Carson told the court he now believed it could not survive.

Mr Justice Kelly had noted earlier that companies placed in examinership now stood a greater risk of being wound up, both as a result of difficulties in attracting investment and because of the reluctance of banks to extend mortgage facilities to aspiring homeowners.

Examinership was akin to placing a company on a life-support system and his experience now was that many companies did not survive, the judge said. Survival was often dependent on procuring additional investment and this was proving increasingly difficult in the current economic climate.

In the Portlaoise shopping centre case, the judge said he had misgivings because one of the conditions considered necessary for the survival of G L Property Investments Ltd, Abbeyleix Road, Portlaoise, Co Laois, and its related company, Portlaoise Construction Ltd, was the completion of the sale of 75 of 91 residential units.

Contracts for the 75 units were not yet completed and he asked that examiner Kieran Wallace of KPMG report back next month as to the state of completion. His concern was whether the purchasers would get the mortgage finance to complete the contracts.

The judge had also expressed concern whether ACCBank, which is owed some €34 million and is the largest secured creditor, would continue to make funds available to allow the companies to trade during the examinership. However, Bernard Donleavy SC said his client had positive talks in that regard with ACCBank.

The two companies have a combined excess of liabilities over assets of more than €25 million resulting from the downturn.