Celtic Helicopters director tells of troubled firm's debt-ridden past

A former director of Celtic Helicopters resigned his directorship in 1992 because of his concerns about the company's financial difficulties and the prospect of legislation which would increase directors' responsibilities. Mr Paul Carty, now a partner at Deloitte & Touche, became an unpaid non-executive director of Celtic Helicopters in March 1985, at the request of the late Mr Des Traynor, at a time when Mr Carty's firm acted as the company's accountants. He resigned his directorship seven years later, just three months before legislation was introduced which would have meant "no partners could be director and auditor of the company at the same time".

Mr Carty said his other reason for resigning was the "uncertainty with the financial position" of Celtic Helicopters, which was heavily in debt. Because of the debt he "would have felt more comfortable advising outside". After the Companies Act of 1992 was passed it would be "much more responsible and onerous to be a director of any company, particularly if you had financial expertise", Mr Carty added.

The accountant said he believed Mr Xavier McAuliffe and Mr Mike Murphy, who invested £150,000 in the firm between them, were aware after meetings with him of the financial difficulties of the company. He said both investors would certainly have realised "there was substantial debt there". However, Mr McAuliffe was a person who was very interested in helicopters and owned his own.

In its early days, Celtic Helicopters traded "in a small and profitable way". He agreed the company's potential at that stage was to provide a living for the two professional pilots. In 1991, the company wished to expand into the maintenance business and made a substantial investment in a new premises. The maintenance business was never significantly developed and serious financial difficulties arose because of the cost overrun on the new premises.

On January 31st, 1992, Mr Carty met the Bank of Ireland to deal with a request from the bank that the company's overdraft facility be reduced. Mr Carty wrote a letter to the manager of the Dublin Airport branch the following month which he agreed was to "make a case to keep the bank off the company's back". In early 1992, the company had a requirement for additional permanent funding of £500,000 to £600,000 if it was to develop and expand its business operations, he said.

The late Mr Traynor undertook to identify interested investors and introduced five between November 1992 and February 1993 making for the injection of approximately £290,000.

Later in 1993, Mr Traynor asked Mr Carty to arrange to calculate the number of shares to be issued to the new shareholders together with the premium at which such shares should be issued.

Mr Traynor spoke to Mr Carty again in early 1994, at which point he was aware that the company had suffered further losses and that the shares would not command any premium. He then felt that the new investors should be issued with 7 per cent preference shares of £1 which would be held in trust for the shareholders by Larchfield Securities. Mr Carty said he did not hear from Mr Traynor again before his death in May of that year. No action was taken by the company to issue the shares, which were shown in the company's accounts as loan capital. Mr Carty raised this matter with Mr Barnacle and Mr Haughey in July 1995 when accounts for a number of years were being finalised. The directors indicated it would be done before the next year ended March 31st.

In early 1996 the directors informed him that when they had sought to raise finance a bank had indicated to them that they would wish to see the share capital position formalised. A formal instruction was given by the company on February 15th, detailing what the new configuration of the capital structure should be. Documentation was prepared to issue preference shares on their instructions, and the necessary corporate actions for formalising the position were taken on March 29th.

The directors wished to maintain confidentiality as to the identity of the shareholders and the directors of Larchfield Securities did not wish the company to appear as the registered shareholder of further blocks of shares. For that reason the shares were held by MIS Nominees.

Mr Carty was not aware at any time that the late Mr P.V. Doyle, Mr Seamus Purcell or Dr John O'Connell had invested in the company.